Not really sure what the market is thinking these days. People are so happy the fed cut the interest rate last month. People are saying the sub-prime market conditions are not doing that back. YEAH! I am not worried about an economic meltdown! It is not so bad considering two of the biggest financial firms, Citigroup and Merrill Lynch, announced “large than expected” losses due to their sub-prime exposure. Not so bad – Their CEOs only had to resign and take home some sick pay (Merrill Lynch’s departing chief executive, Stan O’Neal – $161.5 million – not bad).
How bad are they doing?
1) Will write down $8 billion to $11 billion of its debt this quarter.
2) Has direct sub-prime exposure of $55 billion – That is a big number!
1) First it was supposed to be $2.3 billion, then it was $4 billion and know it is a nice stunning loss of $8 billion.
Fact is, I do not think is it over. This sub-prime issue is about to spill over to other sectors of the economy. The holiday season is coming and people cannot pay their mortgages, not to mention the 10,000 employees fired from one of the biggest lending firms in the States. You think they are going to go out a shop?
I guess we will have to wait and see.