Like Lehman (NYSE: LEH) before it, Merrill Lynch (NYSE: MER) is becoming a short-seller's dream. In the last five trading days, the stock has gone from almost $29 to under $17 on tremendous volume.
According to Reuters, "Looming large among investors' worries about Merrill are mortgage-backed securities and other structured debt held at two of its banking subsidiaries -- Merrill Lynch Bank USA and Merrill Lynch Bank & Trust Co."
The terrible trouble for Merrill and Lehman is that no one knows how badly their balance sheets have been damaged, not even their managements. As credit markets fluctuate and housing prices fall, the value of many financial instruments changes every day.
Bear Stearns was scuttled to a large extent because its large customers pulled out capital. Rumors will cause that.
With the rumors around Merrill, and the short-sellers' ability to fuel the fire, Merrill may be in for a awful week.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-13-2008 @ 9:36PM
angie said...
Didn't I hear that a top executive from Merrill is
supposed to be in charge of the Fannie - Freddie
problems ? Doesn't this sounds TOO much like
the first situation. How did this happen?
Watch what is happening in BOTH financial
arenas ----- conflict of interest???????
9-14-2008 @ 2:30AM
Sheldon L said...
bad idea to promote the cycle