fxtrader07

Why Merrill's CDO Sale Doesn't Mean Big Writeoffs Elsewhere

Tom, you are right of course - that mer esentially sold cdo-stuff for 5ct on the dollar says nothing about the CDOs held by others. It#s in fact not very hard to assume that they can't hold worse stuff but rather might hold better. BUT: what does it tell you about the true state of affairs at Merill? when they sell fpr 5 cents on the buck just to get some 6.7 bn in cash upfront (even if they might have to pay 5bn of that back over time). When they have to dilute their stock at a multiyear low by 38% and to basically issue new shares to Singapore at $7/share? What was all that bs said by Thain worth when he didn't have the balls to issue more new stock earlier while merill was trading much higher?
What is does tell me at least (unlike you me being no banking expert ) is that mer sees very tough times ahead which they feel the need to get prepared for. Even with better cdo-stuff, these times may be as bad for anyone else.
this is NO cyclical downturn for banks - this THE biggest financial services bubble ever deflating.
There is more bad stuff to come - and I am pretty certain that over the next 6-12 months we will see one or more major banks (commerical or Investment) failing to raise fresh equity - leading to a true panic bottom for financial stocks.