Tuesday, July 29, 2008

When Do People Start Going to Jail?

Really. Didn't Merrill just report earnings last week? Suddenly, the need another $8.5 billion in capital and have another $6 billion in writedowns for next quarter. Kind of early to announce that isn't it? Makes me feel as if they had that info last week. Shouldn't the SEC be investigating them for this?

Home prices, ho-hum, another all-time drop on the Case-Schiller Index. IMF says no end in sight and along with Bill Gross, that credit losses will top $1 trillion. But consumer confidence soared .9% so we get a big rally today. It's unimaginable as these companies keep lying to us that investors don't think worse times are ahead. If Citi has to writedown their CDO exposure to the Merrill level of 22 cents, they are looking at another $8 billion quarterly loss.

Furthermore, the IMF says European banks are holding out. They've only written down about 15% of their US exposure. Australia took the plunge and wrote down 90%.

What about insurers? The WSJ says they're lying to us. I can only hope as they point out Genworth Financial as one of the biggest culprits. Losses held for over 6 months are supposed to be brought onto balance sheets and held against earnings. GNW has been holding $3.5 billion in losses for over a year. Of course, the hope is that these products will recover some value. Just ask AIG how that's turning out. Not so good. If just half of those losses were counted, GNW's profits would be cut by 80% for the year. I can only hope....

Calm before the storm. We get GDP and unemployment numbers later in the week. Oh, and by the way, that falling oil price is because the economy is dead. Anyone notice Santa Claus making guest appearances at the mall in the summer? Doesn't feel like holiday shopping season yet.




Anonymous said...


Great post. Jail? No chance they will leave the company with a great package. It is a great gig.

I have an idea. Just as you asked these companies to set you up as a financial adviser for them maybe you should ask them if you could run the show. Tell them up front that you promise to write down/lose only 3-5 billion. It is better than 6-8.

Tell me what you think. Like I said it is a great gig, lose a ton of $$$ and get rewarded for it!

The Real


PS football starts up real soon so lets stay true to the faithful on this site and have a couple of sports posts.

AX said...

Thanks, and I will, just as soon as I stop puking over this market. Have so much material might have to double post again. Expect something tonight or tomorrow once the man stops beating me down.