Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Friday, January 23, 2009

Article Excerpt

STATE STREET CORP., $19.40, New York symbol STT, fell 50% this week after it disclosed higher-than-expected potential losses on its $79-billion investment portfolio. As of December 31, 2008, it had unrealized losses of $5.5 billion (after tax), up 66.7% from $3.3 billion at the end of the third quarter. State Street faces more losses from off-balance-sheet “conduits,” which trade securities backed by mortgages, credit card receivables and other loans. The company does not own conduit assets, but has agreements to provide them with backup loans. State Street believes the credit quality of these securities remains high, and that investors will receive full value when they mature, but a sharp drop in demand for all asset-backed securities has hurt their current market value. As a consequence, these conduits now have unrealized losses of $3.6 billion. Accounting rules may force State Street to bring these conduit assets onto its balance sheet at their currently depressed value. This could, in turn, force the company to…