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Merrill Lynch is forecast by Goldman Sachs analysts to have an $11.5 billion write-off this quarter. That’s after an $7.9 billion hit and a 94% loss in revenues in the third quarter. Merrill’s ex-CEO, Stan O’Neal left with $161 million in his back pocket. Countrywide managed to avert an implosion by borrowing $51.4 billion from the Atlanta Federal Home Loan Bank in the third quarter. However, the assets used as collateral for the loan are raising eyebrows. Countrywide may have transferred its subprime problems to the U.S. taxpayer through a stealth bailout. Meanwhile, Angelo Mozilo, Countrywide’s CEO is under investigation by the SEC for improper insider sales of company stock. Treasury Secretary, Henry Paulson, proposed a “freeze” on a limited number of adjustable rate mortgages. On the surface, the idea of saving families from foreclosure sounds appealing. However, it also prevents the owners of the mortgage-backed securities, many of them foreign, from suing the issuers of these securities to buy them back at face value. In addition, foreclosures are being stymied in Ohio by the courts, since creditors of mortgage-backed investment pools may not have clear title to the homes being foreclosed. Chalk another one up for Wall Street securitized mortgages. Who knows where the title to these properties are? Meanwhile, the European Central Bank had already increased its loans to participating banks by 45% between August and November to EUR 215.1 before “injecting” another EUR 348 billion on December 18th. That amounts to a 280% increase in liquidity injections to European banks since last August. Is there a financial crisis in Europe? Why aren’t they saying anything about it? Blame the sell-off on an assassination…really?
“NEW YORK (MarketWatch) -- U.S. stocks posted steep losses on Thursday, as the assassination of former Pakistani Prime Minister Benazir Bhutto and largely disappointing economic data hurt investor sentiment.” On Thursday, durable goods orders rose by only .1% while analysts expected 2.2%. Today, new home sales declined by 9% to the lowest level seen since April 1995. Both of these items are serious signs of an economic slowdown that may soon be reflected in reported profits. The market cannot withstand shrinking profits in the wake of the debt crisis. Will Treasury Bonds be a safe haven for investors?
A breakout in gold.
The Nikkei finished the year down 11%.
The Nikkei 225 index fell 256.91 points, or 1.7%, to 15,307.78 points, closing at the end of the morning session on the final day of 2007 trading. It's the first time in five years the benchmark ended a year lower than the previous year's close. The Nikkei lost 1,918.05 points, or 11.1%, for the year. In 2006 the benchmark Nikkei gained 6.9%. Investors forge ahead while central planners put on the brakes in China.
Many think that the Shanghai index will stay up through the 2008 Olympic Games. It will be interesting to see how 2008 plays out for the Shanghai index.
Pullback or plunge?
U. S. new home sales fall again.
The housing decline is affecting demographics across the country, with Michigan leading the 50 states in losses of population. In addition, the number of baby boomers coming of age to “step up” into their second home is shrinking as well as first-time buyers of starter homes. A knockout combination for real estate. Gasoline at $3.50 again for the New Year?
Prices for natural gas remain flat.
Crisis may make 1929 look a 'walk in the park' Ambrose Evans-Pritchard has recently published his latest views on the banking crisis. This is getting quite alarming. "They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park."
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Treasury
bonds declined into the T-bond auction on Wednesday, when the Treasury
sold $22 billion of 2-year notes to the general public. On Thursday and
Friday, bonds rallied again, possibly out of fear of another sell-off in
stocks. At this moment, the rally doesn’t show much promise on the
chart, since the decline produced a deeper low. This decline has already
wiped out most of the gains since September. Could it be that bonds will
suffer the same fate as the stock market?
TOKYO
(AP) — Japan's stock market wrapped up a year of jittery trade with a
sharp fall Friday, beset by fears about the U.S. economy and worries
that global political instability will follow the assassination of
Pakistani opposition leader Benazir Bhutto.
The
U.S. dollar seems to have done a little backing and filling this week.
So far, the decline is not critical. If it stays above 76, we may see a
further rally to new heights. A decline below that level may put the
dollar recovery into question. The 
WASHINGTON
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