Good Feeling Gone
14th January 2008
With the Dow down 100 pre-market, the good feeling that we got from Ben Bernacke yesterday is long gone. In short, he said the fed will be lowering rates for the foreseeable future. Of late, the market seems to jump when the fed moves but soon starts falling again. Conspiracy theorists gather around. Why would Bank of America(BAC) buy Countrywide Financial(CFC) unless the Fed is behind the deal? BAC is already the senior creditor in any bankruptcy. They could pick and choose the assets then. The problem is that letting the largest originator of home loans declare bankruptcy would only add fuel to the flames of the burning credit markets.
Another worry is that the New York Times is reporting of a possible 10-15 billion write-down at Merrill Lynch(MER), double the original estimates.
- BA