Cramer and Merrill Going BK

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Jan 17, 2008 6:55 pm

Did anyone else hear Cramer's rant this morning on CNBC? Doesn't warm the shackles of my heart when the recruiters call. Basically he said MER was heading towards bankruptcy until the oil funds bailed them out. He, of course, referred to the the oil funds as terrorsits. Never a dull moment with that clown.

Jan 17, 2008 7:42 pm

On the cnbc website you can see the entire tirade.


An interesting point he made about Ambac was how in the world with Sarbanes-Oxley firmly in place could a company out of the blue not disclose and write down so much. Shareholders got hit with a 50% reduction in value today. Cramer justifiably called them on the carpet and MER as well.
 
Good companies doing very bad things again. Cramer is right on this one. Heads should roll and he is out of financials until the "fiction" ends. He was bullish on WFC, USB with little or no exposure to these loans.
 
Incidentally, I was looking at a Countrywide CMO (in Alt-A paper) at 86 today for a client on the lpl account screen. When I called to see if that was a factual price, they informed if I went to the street I could be looking at 70 or lower to sell now. The bond was insured by MBIA! I remember during my time at Jones, where the bond was sold, that I was told by the bond desk that if Countrywide ever had trouble that it was insured and AAA rated.
 
Now I wonder who is in bed with whom. According to Cramer they all go the same country club, and the boys don't want to harm their friends....by lowering the rating.
 
Anybody care to comment on the good ol boys network in the financial sector. I am curious if someone can confirm Cramer's angst.
 
 
Jan 18, 2008 6:57 am

The thing about merrill is that they, and citigroup, are the only ones that are telling the truth.

Someone on this board gave me the site (mortgage implode meter) and I read an article months ago saying that the  the other brokerage firms have an equal or greater level 3 assets(marked to pull out the a$$ matrix) that the have not written down. S&P put out a report yesterday saying merril has 18 billion in commercial real estate exposure. (hopefully not the next problem like it was in the early 1990's). what about HELOC, and prime loans? He may be right but i do not believe that every one will go out of business. i also do not see how any of these stock revisit their highs anytime soon. the gravy train of mortgage collateralization is over for years and they, the financial firms, may be regulated heavily in the future.
In the early 1990's citigroup did not hit a low until the dividend was reduced to 0. this time the banks are diluting themselves with foriegn investments.
in a bear market brokerage stocks usually trade at book or below. merrill's current book is 27....... after the writedowns
as for cramer, he liked the homebuilders 2 years ago, like MS at 75, etfc at 22 ect. he is an idiot and so is kudlow
Jan 18, 2008 9:17 am
aldo63:

The thing about merrill is that they, and citigroup, are the only ones that are telling the truth.

Someone on this board gave me the site (mortgage implode meter) and I read an article months ago saying that the  the other brokerage firms have an equal or greater level 3 assets(marked to pull out the a$$ matrix) that the have not written down. S&P put out a report yesterday saying merril has 18 billion in commercial real estate exposure. (hopefully not the next problem like it was in the early 1990's). what about HELOC, and prime loans? He may be right but i do not believe that every one will go out of business. i also do not see how any of these stock revisit their highs anytime soon. the gravy train of mortgage collateralization is over for years and they, the financial firms, may be regulated heavily in the future.
In the early 1990's citigroup did not hit a low until the dividend was reduced to 0. this time the banks are diluting themselves with foriegn investments.
in a bear market brokerage stocks usually trade at book or below. merrill's current book is 27....... after the writedowns
as for cramer, he liked the homebuilders 2 years ago, like MS at 75, etfc at 22 ect. he is an idiot and so is kudlow
 
I am also starting to hear grumblings about consumer debt (i.e. credit cards, consumer loans) being the next area to implode.   It only makes sense....the people that are in over their head with their mortgages are probably in the same predicament with their credit cards.  The difference is, with low minimum required payments, credit card problems will take longer to surface.
Jan 18, 2008 11:25 am

$19B in write downs over past three months is tough for a company that makes $7.5B a year (2006 earnings). But best retail brokers and name brand mean it will do fine.

And Gekko, unless you are into B&D, it is the "cockles" of your heart.

As far as credit card debt goes, it warms the cockles of my heart to see that the petty "Bankruptcy" bill the banks passed in 2005 is such a major driver of the troubles they are experiencing today. They made it impossible for struggling families to get rid of card debt, so the families left the banks holding worthless mortgages instead! Hahahaha!

Jan 18, 2008 11:30 am
Broker24:
I am also starting to hear grumblings about consumer debt (i.e. credit cards, consumer loans) being the next area to implode.   It only makes sense....the people that are in over their head with their mortgages are probably in the same predicament with their credit cards.  The difference is, with low minimum required payments, credit card problems will take longer to surface.
 
NOW you are thinking. What is your take on commercial mortgages? 
Jan 18, 2008 12:22 pm
reit          high(market cap) now     debt
spg           28b                     17b      16b
hpt           4.5b                     2.7b      2.7
fch            1.7b                     700m    1.3 billion
 
Back in the early 1990's there were see through buildings. I am seeing this in the new "downtown" virginia beach now. I am not a reit analyst, but when stocks yield 10% the market is telling you that something is wrong. the cost of borrowing is high for these companies and cannot get better with the stock price declining. They do not want to issue stock here and issuing debt should cost more.
 
The tab is due and america is broke. I really think this will all end when we lose a major bank or brokerage firm( and i do not mean etrade, who will go.) lets just hope that does not happen.
Dad was right. keep your debt low, spend less than you make, and always be prepared for a bad day. I practice and preach this. In the words of dave ramsey.
 
 
"Where cash is king, debt is dumb, and the paid off mortgage replaces the BMW as a status symbol" - Dave Ramsey
 
 
 
Jan 18, 2008 1:14 pm
footsoldier:

On the cnbc website you can see the entire tirade.


An interesting point he made about Ambac was how in the world with Sarbanes-Oxley firmly in place could a company out of the blue not disclose and write down so much. Shareholders got hit with a 50% reduction in value today. Cramer justifiably called them on the carpet and MER as well. 
 
Cramer seems to think that Sarbox requires a firm to make the equivolent of Qrtly reports every day. Any day any firm announces a write down it could be called "out of the blue", it wasn't disclosed the day before, was it?
 
The basic question he has about Ambac still stands, though, what's its REAL financial situation, which changes everyday based on the daily revaluing of its debt portfolio. That's an unknowable, and that alone should disqualify it from the AAA credit rating it holds.
 
footsoldier:

 
 
Anybody care to comment on the good ol boys network in the financial sector. I am curious if someone can confirm Cramer's angst.
 
   
You might have noticed Cramer talks out of both sides of his mouth on that one. First,  he profited mightily with the system he suddenly finds indefensable. Secondly, he talked about how all the FI desks banged the institutional customer, and how he'd seen that forever, and then, suddenly, as if he remembered his own club membership, he went into a flurry about how Goldman never did that. Well, if he saw it, and HE was at Goldman, where did he see it?
Jan 18, 2008 1:20 pm
avise:



As far as credit card debt goes, it warms the cockles of my heart to see that the petty "Bankruptcy" bill the banks passed in 2005 is such a major driver of the troubles they are experiencing today. They made it impossible for struggling families to get rid of card debt, so the families left the banks holding worthless mortgages instead! Hahahaha!

 
I sure don't see that at all. The bill kept people with income from getting off 100% free from credit card debt they'd rung up. They had to make tiny, fractional payments to service that debt. Too many people had begun to see bankruptcy as a penalty-free "do over".  Moreover, I really don't see how that bill plays into mortgages.
Jan 18, 2008 1:27 pm

Ahhhhh...a voice of reason.  Good to see you back, Mike...

Jan 18, 2008 1:34 pm

along the credit card note.  A client that has 6 figures outside of retirement accounts called me yesterday, needing 30K cash.  I asked him if he was buying a new car. Opened a can of worms.  Credit cards that were being used by his wife that were being sent to a PO box was going to collections.  So much to good credit and good wife!

Jan 18, 2008 7:55 pm

Cramer is full of sh!t. early this week he is touting ag and Deere, by the end of the week he's taking profits and telling his followers to do the same. What a crook!!!!

Jan 19, 2008 5:49 pm

Heard grumblings from some other managers that Citi may have to spin off SB at some point.  Merrill will end up ok, but is hurting.  Citi is in deep trouble.  

Jan 21, 2008 5:16 pm

Broker7, I had the same thing happen to me--wife ran up $62,000 in credit card debt taking cash advances--husband didn't see what was comming--she filed for divorce and when they went in front of the Judge on the seperation--when ask about family debt--husband said there wasn't any loans outstanding except for the mortgage--wife's lawyer then said yes there is $62,000...because it is a community property state he was responsible for 1/2 of the amount--but during the divorce settlement he agreed to take the whole amount as part of the settlement---I would advise my client to be careful.

Jan 23, 2008 3:17 pm
Indyone:

Ahhhhh...a voice of reason.  Good to see you back, Mike...

 
Thanks, Indy, hope the storm isn't taking down your sails....
Jan 23, 2008 3:45 pm

Not at all...but I'm watching the market's equally irrational climb this afternoon with a combination of confusion and amusement...there's just no telling which way the fickle market will run in the short term.

 
...for the balance of 2008, I'm bullish, but don't ask me where it's going tomorrow...
Jan 23, 2008 4:02 pm

I was going to post a question earlier this afternoon, but the phone kept ringing.  So, I'll ask it now.  I think this afternoon's rally is my answer.

 
Can FA's change the direction of the market.  I'm going to guess that the reason there hasn't been a ton of activity on the forum this week is because we are calling our clients and suggesting they send us their cash.  Here's my question.  If as a whole we are all suggesting the same thing (buy right now) can we affect the market?  Or do the fund companies and money managers decisions than ours?  I can only imagine the amount of money that poured into funds yesterday.  I'm sure it was monumental. 
Jan 23, 2008 4:05 pm

Oh, yeah.  Also, if you are watching Cramer on satellite, make sure you check when the original air date is.  I've watched him recently and thought that he didn't make sense.  Then I looked at that date and saw it was a rerun from mid 2007.  Good thing for those clients who watch him to know also.

Jan 23, 2008 4:11 pm

Spiff, we've been down for almost 3 weeks in a row.. a BEAR rally had to take place.. lasts 1-3 days.  Alot of it is short covering today...LOTS.

Jan 23, 2008 4:14 pm

Watching Cramer on a rerun is like getting married to your exwife a second time!  Yuk!