This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Five Dumbest Things on Wall Street This Week

1. Merrill Mishap

Merrill Lynch (MER) stepped in the subprime mess.

The New York-based brokerage firm stunned investors Wednesday by reporting its biggest quarterly loss ever on a stunning 94% drop in revenue. CEO Stan O'Neal said the culprit was the plunging value of the firm's holdings of mortgage-related securities.

"The bottom line is we got it wrong by being overexposed to subprime," O'Neal said on an earnings conference call, "and we suffered as a result of an unprecedented liquidity squeeze and deterioration in that market."

Also unprecedented was how Merrill's third-quarter numbers kept getting worse even after the quarter was over. Back on Oct. 5, a week after the quarter's end, the firm warned investors that it expected to lose as much as 50 cents a share for the period. Merrill said losses tied to subprime mortgage securities would result in an asset writedown of around $5 billion -- the biggest on Wall Street in years.

But three weeks later, when Merrill reported its finalized third-quarter results, the loss was actually $2.85 a share -- and the writedown was a staggering $8 billion.

Disconcertingly, Merrill declined to explain the sudden $3 billion change -- except to claim that the valuations behind the latest writedown "are conservative and appropriate," as finance chief Jeff Edwards said.

"Let me just say that what we have provided, again, what we think is an extraordinarily high level of disclosure that should be sufficient," he sniffed in response to one question.

Merrill's stonewalling led one analyst to observe that while the firm had indeed disclosed more than other brokerage firms, "your peers didn't take an $8 billion writedown." But O'Neal and Edwards continued their dance.

"I cannot tell you what the market trajectory might be from here," O'Neal replied, "but ... we are comfortable that we have marked these positions conservatively."

Sounds like Merrill's giving us more of the same old bull .

Dumb-o-Meter score: 93. "No one -- no one -- is more disappointed than I am in that result," O'Neal said of Wednesday's $2.2 billion loss.

1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.64 0.00%
CVC $20.15 0.00%
LVLT $54.67 0.00%
WCG $83.50 0.00%
AAPL $130.28 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs