JasonC

Why Is Merrill Lynch Trading Significantly below BAC's $29 Offer?

Lewis says what he means and he means what he says. I made money on the CFC takeover and people said the same things about that one. The discount was 42% when I put the trade on, and it went through without a hitch in a matter of months.

The short sellers hate BAC because it pays fair prices for distressed companies instead of trying to drive everything to zero, and that squeezes them. But Lewis doesn't care. He has to work with the people at the companies he acquires. He treats them fairly, not like dirt. He buys at times when the market is already so distressed, BAC is getting a good price for the eventual future value of the companies he adds.

While one of these is in progress, the arbs will short BAC. It will stay down and the professional shorts will scream and try to scuttle it. But Lewis will ignore them and do exactly what he promises. His word at six months is the same as money, in my book.

Obviously there is a risk in all these trades. That is why they offer a return. Someone short BAC and long MER can lose on both ends if the deal fails apart. YMMV. But I consider MER an attractive way to add to my BAC position right now.