Update on Bank of America & Merrill Deal and Hank Paulson's Bucket Brigade.
We've had close to a day to see what would unfold re Merrill and Bank of America and it appears the markets don't like this deal either. S&P has downgraded Bank of America's credit rating and Moodys will likely follow. Did I miss something or are we literally seeing the arbitrageurs and market participants back completely away from this deal?
If this deal is in jeopardy before twenty four hours have passed, then what? Through his actions John Thain, the CEO of Merrill, has effectively acknowledged what I have written of on here. That the company is broken and their prior business model is gone forever. If Thain is trying to cash out after such a short stint as CEO, what else can we conclude? He'd rather spend time at the beach? The stock was recently trading at near $100 and now he is willing to hand the company over for $29?
I wanted to put up the Paulson press conference but C-SPAN doesn't have a direct link. So, here is a video link to his press conference at CNBC. Paulson again states housing is the root cause of this problem. And, again, he is completely wrong. Paulson didn't even realize there was a problem until Wall Street started imploding. In other words, he doesn't understand the extent or root cause of this problem and he is simply reacting to what he sees.
Again because we are not dealing with the root causes, market forces will continue to act unabated with Wall Street, government and society only able to act in response. In other words, we are in a reactionary policy environment that is doomed to failure in stopping any worst case outcomes. When you have a leak in a basement pipe, do you solve it by having an ample supply of empty buckets to catch the never-ending deluge? Hoping at some point the water runs out before you run out of buckets? That is exactly what we are seeing - throwing buckets pell-mell under the leaks while hoping the water runs out. So, unless something changes, we will watch buckets being deployed left and right. When they start to run low on buckets, they will likely only put them under the major leaks. When will it end? When there is no more water or no more buckets. The difference in those two scenarios is quite stark.
Have you figured out the solutions to this environment yet? Not one CEO in any industry and not one single person on Wall Street is talking about them. And, I do mean not a single person.
If this deal is in jeopardy before twenty four hours have passed, then what? Through his actions John Thain, the CEO of Merrill, has effectively acknowledged what I have written of on here. That the company is broken and their prior business model is gone forever. If Thain is trying to cash out after such a short stint as CEO, what else can we conclude? He'd rather spend time at the beach? The stock was recently trading at near $100 and now he is willing to hand the company over for $29?
I wanted to put up the Paulson press conference but C-SPAN doesn't have a direct link. So, here is a video link to his press conference at CNBC. Paulson again states housing is the root cause of this problem. And, again, he is completely wrong. Paulson didn't even realize there was a problem until Wall Street started imploding. In other words, he doesn't understand the extent or root cause of this problem and he is simply reacting to what he sees.
Again because we are not dealing with the root causes, market forces will continue to act unabated with Wall Street, government and society only able to act in response. In other words, we are in a reactionary policy environment that is doomed to failure in stopping any worst case outcomes. When you have a leak in a basement pipe, do you solve it by having an ample supply of empty buckets to catch the never-ending deluge? Hoping at some point the water runs out before you run out of buckets? That is exactly what we are seeing - throwing buckets pell-mell under the leaks while hoping the water runs out. So, unless something changes, we will watch buckets being deployed left and right. When they start to run low on buckets, they will likely only put them under the major leaks. When will it end? When there is no more water or no more buckets. The difference in those two scenarios is quite stark.
Have you figured out the solutions to this environment yet? Not one CEO in any industry and not one single person on Wall Street is talking about them. And, I do mean not a single person.
<< Home