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WASHINGTON (AP) — U.S. thrifts lost $5.4 billion in the second quarter and set aside a record amount to cover losses from bad mortgages and other loans.

Data from the U.S. Office of Thrift Supervision released Wednesday show federally-insured savings and loan institutions posted their second-largest quarterly loss ever in the April-June period, after the $8.8 billion loss in the fourth quarter of last year. Heavily focused on mortgage lending, thrifts have been stung by mounting home-loan defaults.

The $5.4 billion quarterly loss compared with net profits of $3.8 billion in the year-ago period, and a loss of $627 million in the first quarter.

The 829 thrifts also set aside a record $14 billion to cover losses from bad mortgages and other loans.

John Reich, the thrift agency’s director, said 98 percent of institutions still have adequate capital to weather the housing and economic turbulence.

“I look for glimmers of hope,” Reich said at a news briefing. “The glimmer of hope here is that the industry as a whole is structurally profitable.”

The slump in the housing market and credit-market tumult will eventually turn around after the cycle — which now appears to be at its midpoint — is exhausted, Reich said.

Reich and other banking regulators have been pointing out differences between the current situation and the savings and loan crisis of the late 1980s and early 1990s, citing banks’ stronger capital positions and a fatter federal deposit insurance fund.

The report from the agency, a division of the Treasury Department, came a day after the Federal Deposit Insurance Corp. said the number of troubled banks and thrifts jumped to 117 — the highest level since mid-2003. The FDIC also said profits earned by banks and savings and loans plunged by 86 percent in the second quarter, to $5 billion.

The thrift agency said its number of problem institutions grew to 17 at the end of the second quarter from 10 a year earlier.

The agency said the amount that savings associations set aside for problem loans soared in the second quarter to 3.68 percent of average assets from 0.38 percent a year earlier.

Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in mortgages and other consumer loans — making them particularly vulnerable to the persistent housing downturn. The institutions regulated by the Office of Thrift Supervision range in size from big lenders like Seattle-based Washington Mutual Inc. and Sovereign Bancorp Inc. of Philadelphia to small community banks.

Shares of Washington Mutual dipped 4 cents to $3.55 in afternoon trading, while Sovereign Bancorp added 18 cents to $8.79.

As a percentage of total assets, thrifts’ troubled assets rose to the highest level since the early 1990s, the final years of the savings and loan crisis. They came in at 2.68 percent of assets for the quarter, up from 0.95 percent in the year-ago period.

Like banks, thrifts are being closely examined by federal inspectors for signs of heavy exposure to declining markets or troubled areas such as construction and real estate loans.

The largest bank failure in years occurred in July and involved a thrift. Pasadena, Calif.-based IndyMac Bank was the biggest regulated thrift to fail and the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984. It was taken over by the FDIC with about $32 billion in assets and deposits of $19 billion.

IndyMac succumbed to the pressures weighing on institutions of all sizes nationwide: tighter credit, tumbling home prices and rising foreclosures.

Eight other FDIC-insured banks have failed so far this year, compared with three in all of 2007, and more are expected to collapse this year.
http://biz.yahoo.com/ap/080827/troubled_thrifts.html

NEW YORK (MarketWatch) - A research note by Morgan Stanley released Wednesday
predicts a third quarter loss for Lehman Bros. of $2.80 a share, on the back of a
$3.5 billion write-down. “For the franchise to turn the corner, we think
management needs to announce a significant bulk asset sale or framework for
investors to evaluate the structure/pricing of likely asset disposals (and
incremental capital, should it be needed),” wrote analyst Patrick Pinschmidt. He
also revised his estimates for the fourth quarter, down to a loss of 41 cents a
share from a profit of 30 cents a share. Pinschmidt cut 2009 earnings estimates
to $3.25 a share, from $3.43, and 2010 estimates to $3.85 a share from $4.15. He
said, however, that Morgan Stanley remains overweight on Lehman.

Gold Reserve: Proposal Is Inadequate

Last Update: 8/27/2008 2:29:42 PM

(MORE TO FOLLOW) Dow Jones Newswires (201-938-5400)

August 27, 2008 14:29 ET (18:29 GMT)

The recent declines in the gold price have caused a huge amount of air to whoosh out of gold share prices, to the extent that they now represent pretty good value.

Barrick Gold Corp. (ABX) is a Canadian company, with mostly North American production, plus some in South America and Africa, and copper and zinc add-ons. With a market capitalization of $29 billion, this firm has plenty of liquidity. It has a trailing Price/Earnings (P/E) ratio (on last 12 months earnings) of 15, and a forward P/E (on next 12 months) of 13. The stock is reasonably valued and has little political risk.
Newmont Mining Corp. (NEM) is a U.S. company, operating in the United States, Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand and Mexico. It also has low political risk, but with a $19 billion market capitalization, trailing P/E of 25 and forward P/E of 14, Barrick still looks like a better value.
Yamana Gold Inc. (AUY) is a Canadian company with mining in Brazil, Argentina, Chile, Honduras and Nicaragua. It has a market capitalization of $7 billion and a trailing P/E of 33, but a forward P/E of only 10. There’s medium political risk, but the firm expects to double production to 2.2 million ounces per year by 2012, primarily in Brazil and Argentina.
Gold Fields Ltd. (GFI) is a South African company with mining operations in South Africa, Ghana, Australia and Venezuela (of which they recently sold control to a local company). With a market capitalization of $5.7 billion, trailing P/E of 11 and forward P/E of 10, this firm is an upper-medium political risk, depending on what you think of South Africa. However, its shares have fallen a lot and are now cheap.

Reduced to its essence, focus investing means this: Choose a few stocks that are likely to produce above-average returns over the long term haul, concentrate the bulk of your investments in those stocks, and have the fortitude to hold steady during any short-term market gyrations.

“Find Outstanding Companies”

Over the years, Warren Buffett has developed a way of determining which companies are worthy places to put his money; it rests on a notion of great common sense: If the company is doing well and is managed by smart people, eventually its stock price will reflect its inherent value. Buffett thus devotes most of his attention not to tracking share price but to analyzing the economics of the underlying business and assessing its management.

The FOCUS INVESTOR’s GOLDEN RULES

1. Concentrate your investments in outstanding companies run by strong management.
2. Limit yourself to the number of companies you can truly understand. Ten to twenty is good, more than twenty is asking for trouble.
3. Pick the very best of your good companies, and put then bulk of your investment there.
4. Think long-term: five to ten years, minimum.
5. Volatility happens. Carry on