What is sad is that Merrill will report these writedowns, take all the crap to the Fed and trade it for the Mint stuff and then report it’s numbers as if they are truly solvent.

How come when these banks report they do not have to confess how much of their cash on hand (or Level 1 assets even) they owe to the Fed in 28 days? Can you answer that?

What happened to The Patriot Act and all that crap which said in black and white that the CEO and CFO would forfeit any pay if the company was found to have mislead investors……..oh no, instead we give them multi-million rewards and look away in fear, fear that a bank may go under and that a CEO should have to be accountable or that justice would have to get off her corrupt ass! How many laws do these people have to break before they do get investigated, i.e, why have GAAP accounting standards or suggest that FASB, SEC, FTC, FBI, or introduce international fraud with BASEL?

Yes, unless the state goes after past bonuses and wages of those firms’ executives on account that the “profits” justifying those bonuses were fraudulent and insincere. A company can’t go from record profits to complete crap-out in the space of two years unless the accounting and the “market” used for valuation were fraudulent in the first place.

This is really good news that they have found more fresh bad loans, versus the just old ones! This is a great sequential way to monetize future yield, i.e, decrease cashflow every quarter and then increase the current earnings yield and then run up the price on good news. Re-writing stock valuation in this way is obviously better than the dotcom methods:

The fundamentals were less important as ludicrous P/E ratios were somehow being supported by equally optimistic anticipated growth rates. At their peak, the average P/E on the Nasdsaq (excluding stocks with no earnings) approached 120, as compared to the S&P historical average of 14.

The Optimists

James Glassman and Kevin Hasset, authors of “Dow 36,000,” when discussing the abnormally high P/E ratios in existence as of early 1999 says, “Could it be that the model that Wall Street has been using to assess whether stocks are overvalued – a model based largely on historic price to earnings ratios is deeply flawed?—-We think so.”

On March 10, 2000, the day of the Nasdaq peak, Ralph Acampora, Prudential chief technical analyst forecast that the Nasdaq could hit 6000 in the next 12 to 18 months.

In July 1999, Mary Meeker, an analyst and managing director with Morgan Stanley Dean Witter discussed the markets and the requirements for going public. “The old rule of the 80’s was that a company needed three quarters of profitability and to show a rising trend before trying a public offering. Now, companies should act rationally reckless to use capital markets as a tool and proceed as if they have nothing – and yet everything- to lose.” When asked if we were in an internet bubble, she responded, “No. The next trend – businesses selling internet based services to other businesses will dwarf the revenues of the past four years.

In March of 2000, now Merrill Lynch mutual fund manager James McCall stated, “We don’t get too hung up on valuations. Even if it’s a gazillion times earnings, that’s not my part of the decision.” Two funds he manages opened in March 2000 are both down more than 65% since inception.

In April of 2000, Thomas Bock, SG Cowen analyst, who has never even taken an economics course indicated, “We’re not focusing on earnings or even revenues. We’re looking at the size of the market and a company’s defensible position in it.”

>>>>Merrill still doesn’t get it… go figure????

** From: THE TECHNOLOGY STOCK BUBBLE. Review and Outlook. David S. Carr
Contemporary Topics in Finance
MBA –8439
Prof. W. Delva
April 25, 2001