[jdmartin]

Didn't want to hijack the Lehman thread so it seemed well enough to start a new one here.

Did anyone catch the Ken Lewis/John Thain press conference this morning? Lewis stated that the first time they talked at all about any kind of deal was Saturday morning. And then had a deal by Sunday night.

My guess is that by Saturday afternoon it was obvious Lehman was going bankrupt before the weekend was over. Merrill knew the capital flight on Monday was going to be horrendous for them in the wake of Lehman going down. So did the Feds. So the Feds pressured someone to grab Merrill before Monday's markets could open to keep them afloat. Nobody does a 45 billion dollar acquisition in a day and a half of talks from out of nowhere.

This might make sense for market penetration for BOA, but one can only guess the amount of toxic crap they've just absorbed. Lewis made some excuses about the low level of capitalization (I believe he said less than 6%) and compared it to the same low levels when they acquired MNBA. I think it's a poor comparison, myself. They got a lot of solid assets with MNBA.

[TreebeardsUncle]

This shouldn't be too bad as the inv. bank is being absorbed by them in such form that continuity is likely to be maintained.

However, BOA and Citibank both hold a lot of overvalued mortgage-associated debt masquerading as assets.

Golman, JP Morgan, and WFB are in better shape.

[Gerben]

How will this deal rescue Merill Lynch? Unless the companies are merged, nothing really changes for ML except their stocks changing owner. They don't get an infusion of cash. So they are still broke. The only benefit of being taken off the stock exchange is that nobody will see the stocks plunge when people lose faith in ML. Or am I missing something?

[Snowrunner]

How will this deal rescue Merill Lynch? Unless the companies are merged, nothing really changes for ML except their stocks changing owner. They don't get an infusion of cash. So they are still broke. The only benefit of being taken off the stock exchange is that nobody will see the stocks plunge when people lose faith in ML. Or am I missing something?

Same thing that happened with countrywide:

Investors are "safe" now that someone "bigger" took them over. BoA will pretend for a few weeks (or months) that all is fine, ML will be fine etc. While they pick over the carcass on Lifesupport.

Then when nobody looks they chuck what's left to the wolves.

[joeltrout]

Ken is either a genius or is going to kill BOA.

I am betting he is a genius and buying BAC.

joeltrout

[jdmartin]

Ken is either a genius or is going to kill BOA.

I am betting he is a genius and buying BAC.

joeltrout

I think he made a mistake that's going to jeopardize BOA's long term health. Apparently Wall Street thinks so too, at least at this point, as BOA's getting clobbered. On the plus side for BOA, it will make Merrill's stock cheaper, as according to Lewis the swap was a ratio to BOA's stock price, not a fixed price. Which is why it's laughable that Merrill's stock is being driven up, because when the deal's consumated - asssuming BOA's stock stays down - they're going to be getting stock based on a lower price than the $29 advertised.

One thing I think both Thain/Lewis and their boards considered is that it is very unlikely the Fed will let the new conglomerate of these 2 companies collapse. They likely would have let Merrill go down by itself. Thus, they've tucked the Feds into their back pocket for safety.

[mos6507]

And I pulled all my money out of WaMu and into BOA for this?? Where the hell is it safe?

[joeltrout]

And I pulled all my money out of WaMu and into BOA for this?? Where the hell is it safe?

SAFE????

This is Wall Street in a time of crisis. Nothing is "safe".

joeltrout

[RSFB]

This looks more like a merger than a buyout. It's an all-stock deal... If tomorrow the market decides that Bank of America is worth around 3 goats, this deal will have been worth 1 goat.

[americandream]

And I pulled all my money out of WaMu and into BOA for this?? Where the hell is it safe?

Told ya so!

[americandream]

This looks more like a merger than a buyout. It's an all-stock deal... If tomorrow the market decides that Bank of America is worth around 3 goats, this deal will have been worth 1 goat.

Two old goats for one kid? Nah. More like two old goats for another equally geriartric spin off.

[Gerben]

BoA didn't have any money to buy anything. They couldn't sell new shares to the market. So they traded shares. And those shares they got can now serve as collateral. No wonder they offered a nice premium: the more they 'pay' the bigger its value as collateral. Why isn't everybody doing this? I think we'll see a lot more of these kind of deals.

[dorlomin]

There is alot of chaffe on UK forums today that the BoA\ Merril deal may not be as done as believed.

[jbrovont]

In your pocket.

At least the US Government isn't buying them. Nope. The Fed is loaning money to banks so they can buy OTHER bank's bad debt. See the difference? That way, it's one bank owning another bank except...with lent money. Wait a minute. Isn't that like a person "owning" a home they can't afford by borrowing money from the bank because they're really too broke to buy the house? And then when they can't make the payment because they were over extended to begin with...the...bank...gets...it...back. Um. Uh oh. Danger Will Robinson!

And I pulled all my money out of WaMu and into BOA for this?? Where the hell is it safe?

[lper100km]

I thought this worth posting since it seems to speak to the level of understanding that the investment community has of the fossil fuel crisis.

World on cusp of clean tech revolution: Merrill Lynch

Clean Tech Link

This is how the investment world – well some of it anyway – views the energy crisis. They actually do use the ‘peak oil’ phrase in passing, but it’s only seen as a threat and while the headline suggests that all is saved, the text is only fluff, with plenty of if’s, maybe’s, likely’s and foreseeables.

“Clean technology will rival the Industrial Revolution and every major technological development since then to become the "Sixth Revolution," as the world grapples with the threats of peak oil, global warming and the need for energy security, says financial analysis firm Merrill Lynch.”

“Thus the goal must be to create energy that is abundantly cheap that it can be "wasted," the report states.”

The main thrust is that future power sources could be localized in apartment size housing or block clusters for example, and postulates heavy reliance on nano technology for solar conversion. No mention of industrial requirements. Also, there is some urgency, since we have only 43 years of oil production remaining!

I find it depressing that this kind of fluff can be sent out from a major investment research house.

[idiom]

Our consumption is declining pretty severely right now.

If the recession gets a lot deeper and American car companies are forced to start spitting out Hybrids and EV's then we might have a show.

The deeper the recession the longer Peak is delayed and the more chance we have.

Peak Oil has always been emperical not a priori.

Still... nobody in investment has a clue, you are right about that.

[TreeFarmer]

It never ceases to amaze me how some investment guys, and tech guys as well, think that if you throw enough resources at comething you can always make it happen much faster.

Kinda like if you were to get the right 9 women they could produce a baby in one month.

When it come to developing new technology, it takes however long it takes...

TF

[Revi]

At least they are jumping on the alternative energy bandwagon. There was only one show in town for the longest time, now the fossil fuel industry is dying and everyone is eager to jump on the next big thing. They don't know that it will work, but it's not going to take off like oil.

[BlueGhostNo2]

FT

Not been on here in a while but thought you chaps would be interested in this.

[Schmuto]

http://ftalphaville.ft.com/blog/2009/05/26/56238/merrill-oil-prices-could-pose-risk-to-economic-recovery/

Not been on here in a while but thought you chaps would be interested in this.

Interesting.

No mention of production.

Why are they even talking about this? Isn't this a tacit acknowledgment that the KSA's 4MBD reserve production claim is bunk?