Watch What You Buy

Wachovia took $2 billion in write-downs and another $2.1 billion in new provisions against credit losses, causing it to raise $7 billion in new capital through the sale of common and preferred stock. Of interest is that 2 + 2.1 does not equal 7. Given that the company also expects to save $2 billion by cutting its dividend by 41%, I wonder what the other funds are being used for? Recent problems apparently resulted from the acquisition of Golden West, a California bank and mortgage lender. Right now, "mortgage" and "California" are not two terms you want showing up in your quarterly and annual reports. Not that all acquisitions for Wachovia have been bad, given that the A.G. Edwards acquisition may help them overcome some of their recent problems, or at least provide some steady capital. Of course, I am sure the good folks at A.G. Edwards are not happy, given that their previous stronger shares were converted to Wachovia shares after the acquisition, and are now being further diluted, including a reduced dividend.

Ticker: WB