Get ready, today may well be the day many of the doom and gloomers have been warning us about. CNN just reported Merrill Lynch is writing down an additional $15 billion of investment losses attributable to mortgage investment losses, twice the estimated projection. This report coming so early in 2008 following the recent disclosure by Countrywide, i.e., that its December 2007 mortgage defaults were much greater than anticipated, points to only one conclusion, 2008 is going to be a very very rocky year.
More importantly, or should we say more ominously, Merrill lynch, like many of America's financial companies is being compelled to look to Far East and Middle East governments for bail out money. This appears to becoming more of a solvency issue/struggle than a liquidity crisis, all of which points to the conclusion that a recession may already be here.
While the rethugs talk of more macho military talk in Iraq and Afghanistan and securing the borders, foreign governments are buying their way into America through the front door.
Jan 11 Bloomberg) -- Merrill Lynch & Co., the third- largest U.S. securities firm, may write down $15 billion related to U.S. mortgage losses, almost twice its original forecast, the New York Times reported, citing people briefed on the plan.
Analysts had estimated that the New York-based firm would announce a markdown of about $12 billion when it reports fourth- quarter earnings next week, adding to an $8.4 billion charge in the previous quarter. Losses on bets related to U.S. mortgages prompted the ouster of Chief Executive Officer Stan O'Neal in October and his replacement by John Thain a month later.
Merrill is trying to raise $4 billion from investors in the U.S., Asia and the Middle East to shore up its finances, the newspaper said, citing the same people. U.S. and European banks and securities firms including Merrill have already turned to Asian and Middle Eastern governments for about $34 billion.
``It's going to be a tough year for investors,'' said Hugh Young, who oversees $50 billion at Aberdeen Asset Management Asia Ltd. in Singapore. ``Even if we don't see a technical recession in the U.S., it'll definitely feel like one.'' LINK
Countrywide Financial, the nation's largest home loan lender, reported yesterday that foreclosures and late payments on mortgages in December soared to their highest levels in five years.
The large number of the bad loans alarmed mortgage analysts who follow the company. Several said the Countrywide report showed that housing market conditions were unraveling at an unexpectedly rapid pace. LINK