Wednesday, July 30, 2008

More Write Downs to come….

Although the Merrill news could be seen as good news to some extent, it should also signal the beginning of some real substantial write downs for other institutions. The good news is that with this write down it seems to me that Merrill has taken all its medicine. The remaining sub prime assets on their books are already hedged or written down substantially. The bad news is mostly for all other financial institutions. Since prior to this fire sale there was really no prices to mark to market the portfolios, individual financial institutions were allowed to mark their books where they thought the market was. I doubt (but do not know for a fact) that anyone had their books marked this low. As such I would expect another round of write downs or fire sales in the near term.

Shareholders can not be overly happy either. The share price is now greatly diluted, but at least they are moving forward. I look at this very similar when I trade. Sitting on bad positions, hoping and praying that things will change. I always feel tremendously relived when I finally cut the position and move on. Only then can I begin to make rational decisions again.

Hopefully this will move Wall Street in the same direction.


Good Luck and Good Currency Trading



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