Another Analyst Hammers Investment Banking Stocks (LEH)(GS)(MS)

Banking, finance, and taxes

Published: May 19, 2008 10:43 am

As each day passes, a larger and larger portion of the analyst community turns on banks and brokerages like a pack of wild dogs.

The majority report now seems to be that most large financial companies still have several quarters of write-offs, weak earnings, asset sales, restructuring, down-sizing, and ,in some cases, outright failures.

In a fit of irony, Citigroup downgraded Lehman (LEH), Goldman Sachs (GS), and Morgan Stanley (MS) saying "The second quarter has seen lower client-related trading volumes, little banking activity, losses related to ineffective hedging and reversals of gains on fair valuing liabilities." in a note published by Reuters.

If the analysis is right, these stocks and those of other brokerages are still sharply overvalued. Lehman now trades at $44, about twice it 52-week high. If it is likely to have another two or three quarters of extremely rough earnings, it may be heading back to the $20 to $30. Morgan Stanley has moved from just under $34 to $47.42. A wave of bad news there could push it back below $35.

The brokerage business may just be entering the woods.

Douglas A. McIntyre

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