Excerpt from Bloomberg
Merrill to Sell $8.5 Billion of Stock, Unload CDOs (Update2)
By Bradley Keoun and Christine Harper
July 29 (Bloomberg) -- Merrill Lynch & Co., the third- biggest U.S. securities firm, will sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings imperiled by mortgage losses.
Temasek Holdings Pte., the Singapore-owned fund that became Merrill's biggest investor by acquiring shares in December, will buy $3.4 billion of the new stock, Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment. Merrill will also book $5.7 billion of writedowns in the third quarter.
MER sells 30 bil. of CDO's at 22 cents does the financing and adter 1.7 bil. they participate in the losses again, sells Bloomberg to Bloomberg at discount and finances the deal for Bloomberg - what kind of crook deals are that? At the same time they diluted completely the old stockowners assets - first the destroyed capital, now they make presents and finally they brought in fresh capital with close to no earnings power left - even the worst enemy could have not done any better. Mr. Paulson and Mr. Bernanke who claimed one year ago everything was contained and losses would be around 50 bil. probably only referred to MER?? All this other 'economists' who came up with the mantra this is a selective problem of wallstreet and real-estate speaking of the two backbones of the economic strength in the last 4 years are they just incompetent or bad liars. They keep it up stating that earning after this two sectors are still doing good - mostly thanks to the 'strong dollar' policy of the white house and underpaying the workforce by faked inflation numbers and cooked balance sheet components.
Did you know that most corporations 80 plus % have a fictive profit component which is the corporate retirement funds. It works quite easy you are allowed to assume a figure of 111110% profit for a fictive size of the retirement budget which is mostly not fully paid in even with huge underfunding and add this fictive profits of fictive sums to the earnings. Since decades the earnings were inflated by this numbers - so all this fancy valuation models have a lot of this faked components which make them an unreliable source of evaluation. Finally eve,rybody who claims stocks are cheap especially pulling statistics from the last 10-20 years has no good intentions because thats not a reference period by any means. That is why abby Cohen from Goldman is a 'obscure' lady with her fair valuation claims. The FED model as I explained in a former post is also based on completely false assumptions because without real inflation ,no real bond yields and finally that is what counts.