I hear what you are saying, but should LM morph into mainly a fixed income manager, its stock market valuation and book value will look quite different from that of a tradional asset manager. Take for example PIMCO, a unit of Allianz, they are the largest fixed income manager in the world, yet have a book value in the low single digits (billions). I don't recall what the fee streams on bonds are in relation to equities, but they are fraction, and are without question VERY small when we're talking about managing treasuries.
Someone brought up a good point that BM has very little oversight over most of the firms investment business, which if true, they need to somehow spin this news to reflect that a much diminshed BM is a "mere distraction" to the overall health and competence of LM.
LM has not proven to be profitable in the near term. Pension fund has pulled their money out. Their funds were buying as the stock was falling. If the Fed uses LM for asset management then count on your taxes skyrocketing in the future. They need to change their investment profile. Their main strategy of funding financials paid off huge during the bubble. The bubble burst and they did not get out. They tried dollar cost averaging. (Which did not work).
I think they may have some other bad stuff on their books too. They keep taking charges and after looking at their assets, it appears that the REAL net shareholder book value is near 0$ as opposed to $6B as they have stated. The following is from their last quarterly statement regarding the $6B in "intangible and goodwill". They have suspended doing what most companies are being forced to do, namely write down worthless assets. For those that are not familiar, goodwill is what is left over after overpaying for another company. Take a read:
In February 2008, FASB Staff Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157,” partially deferred SFAS 157 for one year for non-recurring fair value measurements of non-financial assets and liabilities, such as acquired intangibles and goodwill. Application of SFAS 157’s measurement framework to financial assets and liabilities has not materially impacted Legg Mason’s financial position and results of operations for the period ended June 30, 2008.
My take is that the company is in trouble having no real asset base, borrowed several billion dollars and has recently been using this debt to fund losses from something that I don't quite understand. I would stay away from this puppy until they report and clarify deposits and fund balances.
I agree with some of which you say, but you are looking for tangible assets as if LM was a manufacturing company with plants, raw materials, inventory, etc.. LM's main intangible assets are the management contracts on the funds that they manage which have amounted to about $1 Billion per quarter. You must place value on something that has been grossing over $4 Billion per year to LM. Some of the write offs you refer to are to goodwill made up of those contracts future value.