After the close on July 17th, Merrill Lynch announced earnings. Actually it wasn’t earnings, because they lost money. They lost $4.65 billion on writedowns. On the 18th, the stock rebounded from earlier losses and closed slightly higher for the day on hopes and beliefs that the worst was over and that financial stocks had put in a bottom.
Today after the close, not two weeks from reporting their financial results, Merrill announced they were going to take another $5.7 billion writedown of assets and raise $8.5 billion in stock.
Are you kidding me? Is it any wonder that no one trusts the financial numbers or balance sheets of any of these financial companies? They are simply all lies. They are basically putting off markdowns and writeoffs whenever they want. And they are stringing it out to make it not seem as bad as it really is.
The hits and the writeoffs will keep coming until all of this toxic stuff is priced properly. And how can you tell if they are finally telling you the truth? Who knows.
Couldn’t agree more. News like this should be bundled closer with earnings — they didn’t know this two weeks ago?
In addition, I’m not blaming the auditors, but I wonder who comes up with the valuations on the CDOs and other paper these companies hold. What needs to be explained is how these ‘investments’ are being valued — is there some sort of market valuation or is it picked out of a hat and whatever management feels comfortable with? Also, if they really are illiquid, wouldn’t the safe bet be to write them down to zero?
I also find it ironic how money managers avoid micro and small caps because they are illiquid. That may be so at times, but at least there’s a valuation at the end of the trading day.
Archimedes: Give me a place to stand and I will move the earth
IBANK: Give us a Billion to lend and we will screw the world
Aaron,
I know you mentioned on the other thread that you don’t respond to questions about individual stocks on this blog, but I’m wondering if you stopped responding to those questions on the VIC. Someone asked you a question there about HEM on the 29th.
Thanks, Dave in Hackensack. Didn’t see the VIC post. Though I did like calling you Damien better.
Thanks, Aaron.
By the way, nice upward move today in one of your stocks that shall not be named.