Merrill $4.65 Billion Loss, Capital One income falls 40%
Submitted by
CalculatedRisk on Thu, 07/17/2008 - 12:23pm (110 comments)
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This is on the heel of back to back 200 pts rallies. Wow.
Hoofah, that is bad!
Spillover? Ha, completely unrelated. The housing crisis is still contained.
What's not in your wallet?
What's not in your wallet?
Cash!
Ain't been no cash in my wallet for a looooong time.
Now I know why the guvmint is protecting MER. The quarter could not be much worse. Wow, just wow!
Serious miss...
I thought you were only allowed to lose 3 billion.
Well, they missed in style! MER, that is.
It's almost like mortgage rates are forming a long term uptrend at the worst possible time.
I guess I can partly understand the desire to try and stop this by bankrupting the entire country. I dunno if this is feasible though.
Maybe mortgage rates will come down when houses become more affordable and debt-to-income ratios go down.
Still, maybe we should at least consider national insolvency as an alternative.
Don't worry, this is the last of the write-downs.
Merrill Loss Is $4.9 Billion, May Sell $8 Billion Assets
Merrill Lynch Earnings: - CNBC
Merrill Lynch posted a $4.9 billion second-quarter loss because of writedowns but said it is close to selling $8 billion of assets in a bid to raise fresh capital.
The third-largest U.S. investment bank said its quarterly loss applicable to common stockholders equaled $4.97 per share compared with a profit of $2.07 billion, or $2.24 per share, a year earlier.
I have been following this for fifty years and have yet to understand how we get these disconnects between the stock market and reality. These last two days are a classic that will be studied in Business Schools in the future. Ganja anyone?
And while all this is going on we've been forgetting that local governments and federal governments too need to make their nut. Here Corzine is offering his head on a platter to make his budgets work. Why Corzine, why? Wachovia will probably still be very happy to sell you some more auction rate securities.
link for above snotty comment:
Not Even Goldman Resume Helps Corzine Erase Deficit (Update1) - Bloomberg.com
Excluding discontinued operations, the net loss was $4.6 billion, or $4.95 a share, Merrill said. The firm was expected to lose $1.91 a share, according to the average estimate of 17 analysts surveyed by Thomson Reuters.
Once again, Meredith Whitney (-$4.21) wins first place. JPM estimated a $0.20 loss...
Cause for another big rally tomorrow. Blech.
MER AH is only down 3.75%
About 15 minutes ago it was down about 5%.
Hmm...
OT:
Take a straight edge and connect the low-points of anything commodities. Banks too? Doubt it!
Fast Money: Trust The Charts - CNBC
These last two days are a classic that will be studied in Business Schools in the future.
There will be business schools in the future? What a waste of sheepskin.
Looks like another reason for the stock market to go up! Because... well... because it is...um, oversold? Yeah, that's it... and since the banks haven't literally exploded and swallowed all of our money (yet), then now is clearly the time to buy! You won't see stocks this cheap again in years, and stocks only go up!
Just put it on my tab.
Google too missed badly. Hugh rally tomorrow based on the last 2 days.
bet you it opens up flat to positive tomorrow......
These banks all need more capital..the ONLY way to do that is to increase share price and wait for the next sucker who thinks the bottom formed three days ago.
That it has not cratered in AH (especially with that report) makes me think it goes up so that they can raise more money.
Morgan did it in Dec. ( I think-may have been Oct though) by suckering some SWF to wait until 6 days after the earnings release to accept the share price. The result?? after announcing a $6 b loss the share price was driven up over 15% to well over 50 and the price was set at something like 54....stayed there for ONE day....the day the offering was priced.
Only this time these I-banks have some oil profits to play with.
Watch them do it again.
Ciao
MS
@Still, maybe we should at least consider national insolvency as an alternative.
[Hairs stand on end]
I have been following this for fifty years and have yet to understand how we get these disconnects between the stock market and reality. These last two days are a classic that will be studied in Business Schools in the future.
The last two days are just a short rally. Nothing irrational about somebody buying stocks to lock in massive gains on short positions. There's nothing irrational about a hapless short-seller or SKF owner being forced to close out a position due to margin calls.
The longer-term disconnect has been more due to peoples' willingness to believe in their own dreams and cons that are offered up to them under this disguise. Things make more sense when you consider the fact that Wall Street is an entire industry dedicated to convincing people to believe in things that aren't true.
When you have the smartest people in the world working for a financial Disneyland, it's hard for people not to believe. Especially when they grew up watching Mr. Rogers and being told how special and unique they were.
ac: nailed-it comment of the month.
Moody downgraded MER debt.
There will ALWAYS be knife catchers no matter what the actual results were/are.
I wouldn't bet my own money on MER rising however I'm sure there are hundreds (if not thousands) of people who would take your money and do it for you...
Ciao
MS
who cares? The average fund manager is 30 years old and has NEVER seen a Bear Market or a market that stayed down for any time. Add to that fact that they have to be long stock- it's in the prospectus.
The parade of bad earnings continues with MSFT missing target. Even bigger rally tomorrow now that the bellweathers of the economy more or less succumbed to the downward drafts.
ac writes:
...
The last two days are just a short rally. Nothing irrational about somebody buying stocks to lock in massive gains on short positions.
The last two days' run up in financials was an 11-sigma event--not an ordinary short squeeze!
"The End of the World as We Know It?" « naked capitalism
CMBS and ABS are categorized in Level 3 if external prices or inputs are unobservable....
This came out AFTER the bell, no?
@When you have the smartest people in the world working for a financial Disneyland, it's hard for people not to believe.
Man, trying to talk my in-laws into ignoring their money-manager and going into cash was NOT fun. They really believe it's all just a bump in the road.
Merrill is selling its stake in Bloomberg for $4.425 billion. That about covers the loss. And, they're financing the purchase, so they've got that going for them...
The last two days' run up in financials was an 11-sigma event--not an ordinary short squeeze!
It was totally in line with the plunge that lead up to it.
In fact I got out way early because I was expecting the short-covering rally to end all short-covering rallies.
I felt pretty darn stupid for a few days.
I feel a lot better now.
MERde!
Let's not forget that the last rally lasted from the mid-March to mid-May. I'm not saying this rally will last 2 months, but still...
don't forget--fannie and freddie bailout still unresolved
once its resolved--either way--market crashes
now back to your regularly scheduled meltdow
Frankly, none of you inspire great confidence that you know where things are going. But neither do I. Let's just say none of us have a clue and sit back and watch.
Options expiration tomorrow...quite often the Tuesday before to the Tuesday after are "different." Also, often, the Wednesday or Thursday of the week before expiration week is wacky. The other window of "often different" is a couple days before the end of the month through three or four into the new month as monthly cycle retirement money get front-run then dumped.
At least the SEC finally has noticed naked shorting...only took them N years.
I'm not in the confidence inspiring game....I'll leave that to the gov't.
Pretty piss poor job they've IMO
Ciao
MS
How dead does the dead cats have to be before they bounce like rubber on two consecutive days? The zombies arise!
WM was up 4% today! One can understand that FRE/FNM debt is secure now, but their stock too? (up 22% and 18% respectively.
There's some serious 'denial stage' thinking going on in way too many minds.
Uncle Billy Loves BjorK
LOL! You will be a star character in my next financial miniseries. I'm not sure which chapter to start with, but I see murder and chicanery as a sort of idiopathic mechanism to draw out the greed in bankers -- like 401K leeches stealing from the poor and weak, who although meek, and willing to inherit this earth, turn in rage to destroy the masters of darkness at Merrill. I see you as the leader of a group of robots, but of course, you are not a robot, and please don't take that the wrong way..
I need sun... (didn't watch the vid, hope it works)
ahead of the curve
i know where its going
so does roubini, so does tice, so does noland, so does mish, so does KD
its a mathematical certainty
What was the name of the wacky week before expiry?
anon writes:
"This is on the heel of back to back 200 pts rallies. Wow."
Dear Ben:
Thanks to you we've had our most profitable short squeeze ever. With record short interest caused by every warm body anticipating the very obvious recession, and you reflating us past every hurdle, we may be able to squeeze these unknowing bears indefinitely and hold this market up right through the recession, as we talked about with you last year. We may not be able to see across the valley, but with you backstopping every new disaster, we think we can build a very profitable bridge across the valley, short-squeezing as we go and getting us through what could have been a serious market decline with no more than perhaps a 20% drop in the averages. They'll have to rewrite the history books to explain both the shortage of stocks that caused markets to rise right through the 2 year credit collapse, and the wage price spiral that finally kicked in, boosting personal and corporate earnings and the markets, as well as saving the debt structure, but maybe you're the best qualified to write it, history being written by the victors.
GSE debt is not secure
it only takes one man
my money's on BUNNING
filibuster of the year
witness a true American hero (who won the Cy Young in both leagues)
Whitney was right on MER - will be right on CITI:
Merrill, the third-biggest U.S. securities firm, will probably lose $4.21 a share and write down $5.8 billion of assets, Whitney said in a report today, compared with her earlier estimate for a profit of 20 cents. Citigroup will probably lose $1.25, compared with her prior estimate for a gain of 21 cents. She forecast Citigroup's writedown at $12.2 billion.
Let's not forget that the last rally lasted from the mid-March to mid-May. I'm not saying this rally will last 2 months, but still...
Sonic Seuss | 07.17.08 - 5:05 pm | #
I don't expect a 2 month rally after today's numbers.
We now return you to your regularly schedule program: PAIN
I'm with the guy last night who thinks GS and MS are finally selling their oil positions to buy financials prior to the naked shorting limitation, as part of a Fed-led attempt to prop the market. Notice how they are unloading oil in $4-5 steps so as not to panic.
That MER is still refusing to go down below it's opening price for the day tells me that some other things are afoot.
Seriously....who would buy that in AH??
Someone is though.....
Ciao
MS
Frankly, none of you inspire great confidence that you know where things are going. But neither do I. Let's just say none of us have a clue and sit back and watch.
Where's the fun that. Down another 10 percent at least...
MS
MER is still on its conference call. Give it another hour....
Dollar weakness to resume after this short intermission.
dm writes:
What was the name of the wacky week before expiry?
The Wednesday prior to option expiration week is called Weird Wally Wednesday after an old geezer market guru <a href="http://www.wolanchuk.com/>Don Wallenchuk, the biggest permabull on the planet. He's a "buy every dip" sort. He claims to still have longs bought the day Kennedy was assassinated!
I forgot that they still need to let some additional "friends" out...silly me
Still is a bit ridiculous though.
Ciao
MS
x-mqn writes:
GSE debt is not secure
it only takes one man
my money's on BUNNING
filibuster of the year
Filibusters don't work like that anymore, not for several decades. They'll let him ramble for 15 minutes and then vote cloture.
Of course his name isn't spelled anything like Wallenchuk, but wtf do I know I'm wasted agi
I'm with the guy last night who thinks GS and MS are finally selling their oil positions to buy financials prior to the naked shorting limitation, as part of a Fed-led attempt to prop the market.
Agree 95 percent. Why not take advantage of this trading opportunity? But would you buy oil or short financials?
I read that if MER actually did sell any of Blackrock then it would suffer further ratings downgrades based on the bond biz it does through them.....so the line that it's too valuable is just another "line"...
Ciao
MS
$4.65 Billion loss just isn't as sexy as it used to be. This is 2008. I don't put down the coffee for less than $10 bil.
Reasons market could rally tomorrow.
1) The worst is behind us. We are now in the 8th inning.
2) Oil "tumbles" $5 a barrel.
3) IBM profits up.
4) Or maybe they'll think of something new this time.
March through May is still too recent for me to be surprised by anything.
forget MER for a second and look at MSFT. That is tanking!
if fillibuster fails and they guarantee debt, market still crashes, only in a different order
i prefer the fillibuster order, just because houses crash faster
but it won't make any difference in the long run
dollar really is gone if they guarantee the debt
Anonymous,
Thanks, learn something new every day. This goes near the top of my useless trivia heap.
"Why not take advantage of this trading opportunity"
I did! Purchased BAC at 19.90 sold today at 25.40. $$$$
I did! Purchased BAC at 19.90 sold today at 25.40. $$$$
Now what do you do?
MSFT is part of the dow...look for a big drop there
The last two days' run up in financials was an 11-sigma event--not an ordinary short squeeze!
Ya whatever, in bizarro world eleven sigma events, like 'floods of the century' come along as frequently as buses on a busy bus line. If you aren't trading with that in the back of your mind (blended with a little paranoia) then you aren't trading - you are gambling.
Hint: take profits the minute they materialize then get some or all of that gain off the table pronto or don't trade at all. JMHO.
crispy&cole - Nice play. I did the same with CIBC. About the same return too lol.
That was a no brainer...Now what do I do...nothing right now... mostly cash/treasuries.. Out of SKF also
"MSFT is part of the dow...look for a big drop there"
To be rectified by spurious SPX purchases after the session closes...
Ciao
MS
Typical of late, more terrible financial
news but with a rising stock market. But
this is to be expected what with options
expiration Friday, the Fed and Govmnt
desperate to hold up the Dow, etc. Value
only to be found through short squeezes,
index futures manipulation, CNBC hype,
and probably some dopey people who think
this is the market bottom.
The last two days' run up in financials was an 11-sigma event
That's just bad math.
"She forecast Citigroup's writedown at $12.2 billion"
That should cut the legs out from under this rally in a hurry.
" days' run up in financials was an 11-sigma event"
Yeah, the indy mac bank run on every news station was a sign of a short term rally...heck even the CR visitor indicator was signalling a short term buy.
JP writes:
The last two days' run up in financials was an 11-sigma event
That's just bad math.
JP | 07.17.08 - 5:23 pm | #
But teacher - a Black Swan ate my homework!!!
"The last two days' run up in financials was an 11-sigma event"
That's just bad math.
Yeah... it's just not a big deal when placed in perspective.
In fact it looks quite ordinary.
With Goog and MSFT tanking, I bet Jerry Yang is having a chuckle this evening.
11-sigma?
Did the universe just collapse?
that was right about when the CR indicator hit 666....
Pretty good tell....
Techs will be murdered tomorrow...
Ciao
MS
holy crap. Google is getting CRUSHED in AH.
"Techs will be murdered tomorrow"
I wish I purchased the pro-shars tech short...ugh...
Here's an important part of the story.
"Moody's Investors Service downgraded Merrill to A2 from A1 after the results."
A1 is the middle of Moody's single-A tier. There's a good chance Merrill could be a below-investment-grade this time next year. But even if not, it will mean a jump in interest cost, which will hit the bottom line hard for a long time.
Merrill LT debt: $494 billion.
ST debt: $254 billion.
Interest expense: $51 billion!
How would you like to be paying interest of $51 billion a year, and heading to $60-65 billion?
"Oh, shit, they just raised our rate. Can you send in a check for an extra $10 billion?"
12th-Good to see you. Just wanted to let you know, I borrowed your car and sold it to a guy on the corner in Arbor Hill. Let me know if you want it back some time.
Sorry, A2 is the middle of Moody's single-A tier.
On that 11-sigma event thing: The problem isn't with the math, or the number 11, but in using a Gaussian distribution to describe "events" in the market. Many people have shown that it just doesn't work.
I wish I purchased the pro-shars tech short...ugh...
You can be the QID after the bell for 5 minutes or so. I bought some when I heard GOOG missed... Cheap too I hope.
New thread
Yeah, the indy mac bank run on every news station was a sign of a short term rally...heck even the CR visitor indicator was signalling a short term buy.
crispy&cole | 07.17.08 - 5:24 pm | #
Hell - the thing that told me we were ripe for a squeeze were all the shorts coming in bragging at the end of every down day the last few weeks - getting more and more giddy - 'shortgasming'.
Nothing fundamentally had changed or has changed now - people just get trend crazy & got out in front of the tape. That's why I don't 'trade'. I probably be as loonie as anyone.
"Google is getting CRUSHED in AH"
6% down. Still carrying a 40 p/e, into a rapisly deteriorating economy and market. What monopoly do they have? They should get cut in 1/2 from here.
I almost took profit on those (QID bought two weeks ago) today.....It's in an IRA so I was less worried about the noise of the last two day's in proper context.
looks like a good no call....
Still think MER stays up here.....hasn't been below 28 save for a few minutes or so....
Ciao
MS
Ciao
MS
Somehow, I just don't feel too badly for Capital One. But they've stopped sending me a new solicitation every day. Connection?
So here is the question - is the Fed expecting some seriously bad news late tomorrow that would require it to prop financials next week?
Like, maybe a few banks going under this weekend?
(ring...ring)
"Hello?"
"Uh, Ms. Anderson? This is the U.S. Treasury. Good news! We're just calling to let you know there's another stimulus check on its way to you soon."
"Another stimulus check? That's really a tax cut, right? I mean, it's based on my income tax return after all."
"Well, no, ma'am. We at the federal government like to reserve tax cuts for the wealthy, and (heh heh) you're employed, and all..."
"I see. More of a rebate, then?"
"Best not to over-analyze, ma-am. Clearly, the intent here is to keep America strong and not let the terrorists win, you know. Do I have your address correct?"
"Well, I was gonna flip this house, but hell, I can stick around until the check arrives. That will be when, exactly?"
"Just as soon as we resolve a little cash flow problem over at the FDIC - should be a few days, tops."
"I see."
"Now, there's a small matter of a tax increase to cover postage and handling."
"Oh? That's odd. Can you deduct it from the check?"
"Uhhhhh, no ma'am (ahem). We'll need to collect that in advance."
"How much is it?"
"Four easy payments of two billion, four hundred thousand, seventy six dollars and ninety-nine cents."
"WHAT? That's outrageous!"
"Well, as I said before, ma'am, you are employed and all. We can't expect the top 5% to cover for the rest of you people. But if you insist, I can knock off one payment if you agree to defer your stimulus check until January 21, 2009."
"Oh, all right. Put it on my Capital One Visa. Hold on while I get my purse."
Bad news next week will be no bail-out for Fanny & Freddie. Vote has been put off until next Tuesday and it is not getting much support.
Vote has been put off until next Tuesday and it is not getting much support.
F/F bailout and the foreclosure bill are one in the same now, right?
rc writes:
Bad news next week will be no bail-out for Fanny & Freddie. Vote has been put off until next Tuesday and it is not getting much support.
rc | 07.17.08 - 5:39 pm | #
Fear paralyzes...
Here's the latest.
Fannie Mae, Freddie Mac Rise as Financial Stocks Gain (Update3) - Bloomberg.com
There better be no bail out for F&F
Re: CMBS and ABS are categorized in Level 3 if external prices or inputs are unobservable..
1. external prices (or inputs)
2. unobservable
Ok, first off, how about a definition of inputs?
Summary of Statement No. 157
Fair Value Measurements
FASB: Financial Accounting Standards Board
See Also: In the symbolism of Alice in Wonderland this point is brought out exquisitely in the falling of the animals into the pool of tears. The fall in all cosmic symbolism is descent into manifestation, and in this chapter the sudden appearance of these animals is interesting not only in their nature and type but in the detail of their arrival almost out of nowhere.
Studies in Alice II: The Pool of Tears
Told you, something was FISHY with Merrill...
wonder is Merrill the next B...S....?
p.s. I think the best measure of a Bank Health is deterioration of S. Equity to T. Liabilities ratio; the rest is questionable accounting triks..
Even these retards are still confused, so how is The FBI going to bust anyone if these stooges can't figure out how to manipulate accounting standards:
IAS Plus: IASB Past Meetings - April 2008
Liabilities Amendments to IAS 37 (was part of Business Combinations Phase II project)
Measurement Guidance
The IASB staff introduced the first draft of possible application guidance to accompany the measurement requirements of proposed revisions to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
The Board did not make any real progress, and it was evident that they were still divided as to their understanding of 'transfer' and 'settlement'; the notion of 'rational' actions; and the measurement attribute being applied.
Some Board members thought that they had decided (in January 2008) that 'settlement' implied that there was a counterparty. Other Board members noted that, in some cases, there is an obligation but no counterparty, often because the obligation is imposed by stature or as a condition of a mineral resource licence.
Thursday, July 17, 2008
S&P Requests Comments On Proposal To Explicitly Recognize Credit Stability As A Rating Factor
Standard & Poor's Ratings Services is requesting comments on a proposal to incorporate credit stability as an important factor in our rating opinions, given the volatility recently experienced in the market
Market Pipeline: S&P Requests Comments On Proposal To Explicitly Recognize Credit Stability As A Rating Factor
What about Blacklisting?
Wachovia and Washington Mutual are among the lenders who are shying away from writing loans in areas with declining home values. And they're considering more than just location. Some housing types or projects are also being put on the no-no list--namely condominiums.
The lists aren't widely circulated and usually go under another name. 'We don't call it blacklisting,' a banking official told CNN Money. 'We just don't write the loan.'
Although some banks don't call it blacklisting, there are actual blacklists that contain non-permissible housing projects and geographical areas. To see an example, check out the BankUnited list of non-permissible condominium projects in Miami and Las Vegas.
Market Pipeline: February 2008
Blacklisting or red lining used to refer to poor people or certain ethnic groups. What's being blacklisted is certain supposedly expensive condo towers.
I saw a partial list of BankUnited's, and it certainly is a good idea not to write loans in those towers, which had soooo much fraud.
Which is not to say that I've changed my mind about BankU being one of the next to go--and good riddance.
curious-er wrote:
ac writes:
...
The last two days are just a short rally. Nothing irrational about somebody buying stocks to lock in massive gains on short positions.
Wonder if it has anything to do with the SEC's new rules on short sales?
None of these losses matter - it is all "priced in."
Citi just came in with over $7 billion in losses, which is "less than expected." Ah, so now the economy is doing well if the large banks roll over and die at a rate slower than that predicted by number-hitters who have no clue. Funny how it was all "contained" a year ago, and yet now we're supposed to applaud $7 billion in losses. Right...
Headline from 2009: "Closing of Citi bank went faster than expected." or "Citi bank losses of customer information to hand over to FDIC less than expected." And they'll expect us to be happy at those "successes" as well.
Market will go up today and keep on heading back up to around 12,000 before the next plunge. It's all a racket. By rights, the DOW should be under 10,000, the dollar should crash, and oil should stay high. Not saying that these are good things, but prolonging the pain now with lies just to take more money from suckers will only make the crash more painful to us when it happens.
Oh, well...