Politics > Politics-Economics > Merrill Lynch Takes a Dump; That "Super Conduit" Just Ain't Reassuring Investors. Perhaps Bank Presidents Should Switch to a "Super Condom." Ha ha ha.
| Topic: |
Politics > Politics-Economics |
| User: |
"Lisa Lisa" |
| Date: |
24 Oct 2007 07:35:53 PM |
| Object: |
Merrill Lynch Takes a Dump; That "Super Conduit" Just Ain't Reassuring Investors. Perhaps Bank Presidents Should Switch to a "Super Condom." Ha ha ha. |
Merrill Lynch's pain adds to gloom for financials
Financial Times
Merrill writedown takes toll on financial sector
By Michael Mackenzie in New York
Updated: 16 minutes ago
Financial stocks are enduring their worst run so far this year, and
the mammoth loss at Merrill Lynch on Wednesday highlighted how third-
quarter earnings are failing to meet already low expectations.
The financial sector accounts for 20 per cent of the overall S&P 500,
and its poor performance is dragging on the broad market. The S&P is
down 2 per cent this month as the financials sector has fallen 5.9 per
cent.
Investors fear that unless financials stabilise, the risk of a broader
market sell-off remains high.
However, the prospect of a rebound in banks appears unlikely as the
sector faces a deterioration in credit quality for mortgages, car
loans and credit cards. Aside from growing consumer woes, the capital
market revenues of banks looks shaky as the market for complex
structured finance securities remains impaired.
Not even the prospect of a further rate cut at the end of this month
by the Federal Reserve has alleviated the gloom surrounding the
sector. This is unusual because in past rate-cut cycles, financials
have usually led a market rally.
"The half-point cut by the Fed last September was certainly welcome,
but it wasn't a panacea," said Jack Ablin, chief investment strategist
at Harris Private Bank.
"Credit concerns still surround the markets and banks like Citigroup
and Bank of America are bracing for further fallout."
Merrill on Wednesday provided the latest example of earnings woe among
financials. The bank wrote down $7.9bn in credit and mortgage-related
securities, $2.9bn larger than the estimate it gave at the start of
this month.
Merrill's net loss of $2.24bn for the quarter and a subsequent cut in
its credit rating from Standard & Poors and Fitch sparked a fresh
decline in the S&P 500 financials sector. The bank's own shares closed
nearly 6 per cent lower after the announcement while the S&P 500
financial dropped as much as 3.3 per cent in the morning.
In nine of the past 11 trading days the sector has registered a fall,
and it is more than 8 per cent below its high of 481.94 set on October
9.
Back then, investors sniffed a buying opportunity after Citigroup,
Merrill and other banks had provided earnings warnings. Investors
initially believed the guidance signalled that the worst from this
summer's credit squeeze was over.
"People were too eager to bottom fish," says Doug Peta, strategist at
J&W Seligman.
The average growth rate in profit for S&P financials over the past
year has now fallen 12 per cent in the third quarter, according to
Thomson Financial.
Expectations for profit growth in the fourth quarter have eased to an
expected rise of 3 per cent, down from 7 per cent at the start of
October.
There is the prospect, however, that the sharp writedowns could
bolster future earnings, should the impaired assets recover at some
point.
"Most of the markdowns were probably generous and if those assets
recover some of their value, dealers will receive an annuity in the
coming quarters," says Gerald Lucas, senior investment advisor at
Deutsche Bank.
But much depends on whether vulnerable areas of the market stop
bleeding, while a proposed $110bn "super-SIV" fund being set up by top
US banks to help structured investment vehicles has so far failed to
lift investors sentiment.
"Plans for a super conduit went over like a lead balloon," said Mr
Peta.
A further decline in the subprime mortgage market will buffet future
results if dealers have not hedged their exposures, says Mr Lucas.
Dealers also face the prospect of less revenue from structured credit
in the future as the business model needs to be modified said Mr
Lucas.
Copyright The Financial Times Ltd. All rights reserved.
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| User: "" |
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| Title: Re: Merrill Lynch Takes a Dump; That "Super Conduit" Just Ain't Reassuring Investors. Perhaps Bank Presidents Should Switch to a "Super Condom." Ha ha ha. |
24 Oct 2007 11:58:10 PM |
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On Oct 24, 7:35 pm, Lisa Lisa <mando...@verizon.net> wrote:
the jig might simply be up. almost all of the equity from the new
deal has now been stolen. there is little left now but debt, falling
wages, increasing poverty, growing unemployment/under employment, a
collapsing currency, twin deficits that are growing every year with
growing interest to be paid back. its impossible. plus we are saddled
with a cult that has a feverish grip on america which shows no sign of
weakening. we rely on myths, lies, distorted statistics, increasing
oppression of our citizens to show a illusion of equality and growth.
they have themselves in a real trap now of their own making. lower
interest rates to save the wealthy parasites and we end up with
worthless paper and depression.
keep rates where they are and let it die slowly. either way it will
be a tough one to dodge.
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