One assumes that the job of CEO of one of Wall Street's premier financial institutions comes with no shortage of perks. Oodles of cash, of course, a bevy of executive assistants to take care of all of life's more trifling humdrum mundanities, the ability to call up the treasury secretary on the phone and shoot the hay. But every now and then, a rain cloud appears on the horizon. I, for one, would not have wanted to be Merrill Lynch's Stanley O'Neal Wednesday morning, just before taking part in a conference call with Wall Street analysts, knowing that I would have to explain how the company was forced into writing down $7.9 billion worth of collateralized debt obligation and subprime mortgage assets -- a considerably worse performance than the company had predicted just three weeks ago.
In a pioneering example of the future of business journalism, the Wall Street Journal's MarketBeat "live-blogged" the earnings call, giving us a blow-by-blow account of what it's like when analysts sniff blood in the water. If you look at a chart of Merrill-Lynch's stock performance on Wednesday, you can see that during the period of the call, from 10 a.m. to 11 a.m. EDT, share prices plunged, going on a particularly steep downhill plummet starting around 10:40, or about the time that the analysts started asking whether there was "another shoe to drop." MarketBeat's final editorial comment, at 11:03: "The call ends, with shares off by 5.5%, suggesting officials haven't exactly helped themselves on the call."
My favorite part:
The call is interrupted by the "hold" music, for some reason. "We're back after a brief musical interlude," Mr. O'Neal says. Laughter is minimal.
Laughter is minimal. Tough crowd! One wonders, are these things normally a happy-go-lucky chortle-fest? Maybe if you're announcing record profits, or you've prepared snappier one-liners. But not today for Merrill Lynch. You want pressure? How about participating in an earnings call, knowing that with every evasion, stutter or answer considered "unsatisfactory" another ripple of "sell" order rockets out into the ether.
(The overall performance of the markets was no better -- by midday Eastern time, the Dow Jones industrial average was down around 171 points. Investors had other things to worry about than Merrill Lynch's woes, however. Woeful news from the housing sector keeps on coming: existing home sales fell to a 10-year low, and there were reports that default troubles are beginning to show up in Countrywide's prime mortgages.)
One supposes there are worse things than an uncomfortable earnings call, even if it is a prelude to getting summarily sacked -- losing your home in a brushfire, for instance, or losing your job and being unable to pay your mortgage. The real story here isn't whether O'Neal screwed up, or whether even now Merrill Lynch is underestimating its exposure to further losses, but how far all of this is going to go. What does Stanley O'Neal's manifest inability to evaluate risk mean for the rest of us?
That question, however, did not appear to be on the earnings call agenda.