Actually I’d stash it in foreign treasury bonds starting with Canada.

Temasek Holdings has sold off half its ill-timed investment in Merrill Lynch – or about 87m shares, according to a mutual funds report on institutional trades on US stocks.

The online report, MFFAIRS (Mutual Fund Facts About Individual Stocks), reported it sold off 86,949,594 shares (50%), leaving a current holdings of 86,949,594 shares (50%), according to the filings made public.

The report gave no exact date or price of the sale.

Neither has there been any confirmation from Temasek, which had paid US$48 a share last year. http://www.mffais.com/newsarticles/2008-07-22/2473637-211738.html

Last week Merrill Lynch was traded at $31.

At that price Temasek would have suffered a loss of $17 a share – or a total loss of about US$1.48b for the 87mil shares.

Despite massive write-downs and capital injection, Merrill Lynch’s outlook remains uncertain, reports Bloomberg.

The company’s equity capital position is weak relative to competitors, said Brad Hintz, a New York-based analyst at Sanford C Bernstein, reports Ambereen Choudhury.

“With $19.9b in CDOs still frozen on the balance sheet and with counterparty risk rising on the hedges underlying these troubled positions, the potential for additional material write-downs remains a concern,” Hintz said.

The New York-based firm’s credit rating was cut last week by Moody’s Investors Service to A2 from A1.

The third-biggest US securities firm probably will report a loss of $6.57 a share this year, compared with an earlier forecast of $1.07, Hintz said.

The revised estimate assumes the company generates no earnings in the second half.

Merrill may have to take an additional $10 billion of pre-tax write-downs related to its holdings of mortgage securities, Moody’s estimates.

Huge paper losses

The disposal leaves Temasek Holdings and the Government Investment Corporation (GIC) still holding substantial parts of big troubled Western banks.

Its remaining investments in UBS (Switzerland), Citigroup, Barclays and Merrill Lynch – at an original cost of US$21.88b – have declined on by some 47 percent in value.

That is a paper loss of US$10.28b. However, Minister Mentor Lee Kuan Yew had said these investments were made as a long-term strategy of 30 years.

But as the Merrill Lynch sale shows, Temasek is not inflexible about cutting losses, if things threaten to get worse.

The political leadership has defended its investment of these sub-prime banks as “an opportunistic” foray that can happen once in a long while.

It believes these companies will survive the crisis and emerge stronger.

Some experts believe that Temasek has made an error of judgment.

Investment guru Jim Rogers said in July he believed that US bank stocks could fall further and predicted that Singapore’s state investors would lose money on Citigroup and Merrill Lynch.

“I’m shorting investment banks on Wall Street,” the successful investor said. “It grieves me to see what Singapore is doing. They are going to lose money.”

At the Nomura Dialogue recently, Minister Mentor Lee Kuan Yew reported to investment mistakes, but that no one had benefited from it.

Singaporeans who want to see greater transparency in the government’s investments in troubled companies are unhappy with this vague answer to a serious problem.

One writer said, “Should we just move on? I do not think so. The patently huge mistake is not merely the result of recklessness but rather a systemic lack of accountability in making some of our largest investments.

“Let it be clear, the harm is terminally done. The entire reserves system must be re-examined and audited.”

Said slohand, “I saw the interview on TV last night and felt shortchanged.

“He brushed aside the issues with the logic that since the officers who made the decisions were not the beneficiaries in any sense of the word, such lapses are mistakes and are therefore acceptable…

“..The size indicates that it can only come from the very top.”

The skies are dark but the storm has not broke yet.
By Seah Chiang Nee

“They bundle home loans into securities to sell to investors and use cash from the sales to fund mortgage lenders.”

This is more commonly described as a circle jerk. Gross is one of those in the circle.

‘I don’t think China/Japan/Q8 will have the appetite for much more of this nonsense’

Again ladies and gentleman, The China’s and Japan’s of the world have benefitted from our debt policies as much as we have. I strongly disagree with those who say if we fall other places will be safe havens to park your money. That being said, other places may eat our lunch and leave us in the dust eventually. That being said when the game ends here, the game ends everywhere. A massive deflation here means a massive deflation everywhere.

I actually saw Larry Kudlow short circuit today! I believe he believes if he talks loud enough, reality will bend to his whim. I have heard of whistling past the graveyard, but not covering your ears, closing your eyes and yelling, ‘LA- LA- LA-’ past the graveyard.

It calls to mind (in a perverse way) the book Enders’ Game. In the book Children were pulled from their families at an early age and “trained” in various contests. I the end they were told that they were engaged in simulated wargames as part of their “tests” to graduate. In fact, they were fighting real battles but they were led to believe they were just “games.” The point was that these “kids” were better at fighting than generals trained over many years. In part, because they failed to grasp what was at stake.

I thinkof this now as I realize that our financial “leaders” are really no different.(although perhaps in an “opposite” kind of way) They have been trained to react to blips on a screen as though they were reality. Thus the “solution” to housing it to make the interest “blip” go down and all will be well. Does it even occur to these guys that in the “real” world people who have no jobs or whose income is being eroded by higher taxes and lower wages and higher gas prices are really not in a position to respond to these “blips.”

We have spent all of “investment” money to build ourselves lovely new houses and nice shopping malls. What we have not done is “invest” in anything truly productive as our manufacturing base gets outsourced and dismantled. Our “service” economy is nothing more than selling stuff to each other.

Yes everything seemed to be “booming” when we were building all of these homes and shopping centers (and cars and trucks to get there and build them). But now what do we do? Where does the “income” come from to pay back all of the debts that were built up to build ll of the houses.

This is not some computer game like “Civilization” where resources just appear from turn to turn. We have just finished a HUGE period of dysfunctional capital allocation. We need leaders who do more than check Bloomberg charts on their computer. We need people who can nurture real investments in tangible industries. This takes time and patience and hard work. We need leadership who can realize that the true “stars” of the economy are those hard working types who really establish, maintain and grow small businesses. Not some hot shot hedge fund kid who trades assets and lives off commissions while he destroys everything around him. We need to value industries that EMPLOY people rather than merely shift money around.

Unfortunately the true strength of the economy is in all of these “boring” areas that employ untold millions of people. we should be somewhat more concerned about markets that create jobs rather than markets that trade things. Money will always find a way to make money.