Zacks Analyst Blog Highlights: Goldman Sachs, Lehman Brothers and Countrywide Financial

Business Wire, July 31, 2007

CHICAGO -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Goldman Sachs (NYSE: GS), Lehman Brothers (NYSE: LEH) and Countrywide Financial (NYSE: CFC).

See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673

Here are highlights from Monday's Analyst Blog:

This is Normalcy

Heading into July, the U.S. markets were enjoying a span of four years with just six Dow moves of 2% or more (three to the upside and three to the downside). In other words, volatility had left the building.

So volatility is back. What should you do? Well, do what you've always (or at least should have) been doing: make smart investment decisions. The repricing that is occurring in the debt markets is nothing more than rationality making a comeback. While it is possible that the credit markets could tighten enough to adversely affect the number of deals completed in the future, earnings estimates revisions for the likes of Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH) don't suggest it will happen. Conversely, profit forecasts for these firms are unchanged in July and up from June. Could this change? Sure, but it hasn't yet -- and that's a bullish sign.

Thoughts on Volatility

American Home Mortgage (AHM) will delay they payment of its already declared dividends. I don't know if this delay is unprecedented, but it sure as heck is unusual. AHM was not a sub-prime player, more a prime and Alt-A company. Put this together with the news that Countrywide Financial (NYSE: CFC) the largest independent mortgage company was seeing increasing delinquencies in its prime book of business and it looks like the idea that the problems are contained to sub-prime is just plain spin or wishful thinking. Most of the banks that have reported have sharply increased their loan loss reserves, and I suspect that this will be a trend that continues for several more quarters. Thus at the very least, it would make sense to continue to underweight the Financial sector, at least until the bag-holders are known.

I don't think this situation sinks the amazing worldwide economic growth that is going on. While there was less to the U.S. GDP growth in the second quarter than the headline of 3.4% growth implied, it was still a much better showing than what we saw in either the 4th quarter of last year or the first quarter of this year. China's growth has continued to accelerated, and the rest of the emerging economies of the world are still looking good (with the exception of most of Africa).

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645

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