Plenty of stories today, GE missing by a mile in its q1/08 earnings-mostly due to the financial side of the business. Jeff Immelts comments following the announcement summed up the battle in the mkts=financial side is depressed while the real economy outside of the US continues to expand. Other comments regarding US domestic consumption, in particular the housing sector continue to show weakness. Mkt impact was to start lowering the bar for all financials as q1 reporting season gets under way.
The Wall Street firms are once again trying to hide their terrible balance sheets by accounting gimmickery. GS and MS have already moved some of their assets into the Level 3 (L3) category as the recent letter regarding pricing of L3 assets suggests a more lenient interpretation. In addition, the WS dealers have been repackaging all sorts of financial garbage(CDOs, CMBS, LBOs,etc) and then lending them to the FED via the TLSF. On top of that, the FED has then re lent the re packaged garbage out. The balance sheets of the US Financials are not to be trusted and they are delaying the day of reckoning hoping to trick some investor to take some the garbage. Latest money supply stats show the banks are technically insolvent=http://www.federalreserve.gov/releases/h3/ . Non borrowed reserves at -98 bln while TAF at 100 bln. Next week should put them over the top.
G7 meeting this weekend might result in a plan being developed to lift the load from the Financials, but I suspect there is great disagreement between the US and European interests.
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