Writedowns That Are Over, Still on Schedule For This Week
In the Sunday Time online, a UK paper, we learn that the writedowns that are now over with will continue next week courtesy of Merril Lynch and Citigroup:
From the Sunday Times
April 13, 2008
US banks Citigroup and Merrill Lynch reveal fresh $15bn loss
CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.
In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its 35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.
Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.
Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.
I would love for the multitude of market commentators that were so sure things were over with a recently as last week to be asked to comment on this new round of writedowns. I imagine they would just say "Well this is the last of it this time I am sure!" Even though calls for the end of losses are constantly being shown to be wrong, don't expect these calls to stop anytime soon.
Alcoa, UPS, GE; Not Exactly Subprime Companies
Earnings season was off (haha, get it? OFF) to a poor start last week with misses by Alcoa, UPS and GE. While GE certainly has a bit of exposure to the finance angle of things, it is a broad business exposed to all facets of the economy. These bellweather companies are saying that the once "contained" subprime debacle has indded filtered out to the broader economy. While this is no surprise to the kind of folks that read blogs like this one, it is still fun to watch the CNBC types in the mainstream say they are "shocked", "surprised", or "blindsided" by such events. At some point soon the problems that the P/E 's of the DOW, S&P, and other indices have will be hard to ignore. Again, current stock prices do not reflect a slowdown at all. Nothing is in fact "priced in" regarding a possible recession. Keep this in mind if you are going to venture into the market.
Not Every Negative View is a Short
I know, I know, never read message boards! But if you do you will see that any negative observation or opinion is railed as a "short". This stupid idea has even extended as far as infecting Cramer and others who think everyone not waiving pom poms for the markets are all aggressively short stocks. I am currently out of all positions, but I am looking for a play to make. I am negative on MANY aspects of the economy and stock market. I DO NOT short. I don't like the idea of shorting and I am uncomfortable doing it. You can only make at most 100%, but you could lose a lot more. I only make plays on the long side myself. This is not a commentary on anyone else's strategies, just explaining my own. So not every negative voice out there is a short. And besides, shorting is a legal way to play the market, so just shut up. You do not see people screaming at the LONGS for jacking the market up on hype do you?
Books, TV, and Movies
On Saturday the mail brought the new book "Greed, Fraud, and Ignorance" by Richard Bitner. This book details an insider's view of the subprime shenanigans. I just read the opening chapter, and it seems like it is going to be pretty good. I will update in a while if the book is a full on recommendation.
The HBO series "John Adams" is down to its last few episodes. The series has been excellent and I easily advise checking it out.
I saw "No Country for Old Men" last night. I was both impressed and a little let down. The acting was top of the line. The filming was great and set the dark mood of the film. The Characters were all deep and multi layered. I just really did not think the ending was all that great. Still, a strong recommendation from me.
My favorite scene from the film "The Matrix", perception makes reality indeed!?
In a trilogy full of memorable scenes, one great one is Pippin's song from "The Lord of the Ring; Return of the King":
Have a good night.