Now Merrill Lynch Preventing Clients from Exiting Auction Rate Securities
April 1st, 2008I’m tired of typing EMERGENCY and story titles in all caps for situations that are becoming commonplace. I mean, I don’t know if there’s dope in the drinking water of the people who are holding these things, but when I read that major financial institutions aren’t allowing clients to exit trades worth—well, we don’t really know how much—that’s a wolf-at-the-door emergency to me. That’s just me. I’m a bit weird.
Via: CNN / Dow Jones:
Merrill Lynch & Co., taking a different tack from UBS AG, told its brokers Monday afternoon that most clients’ holdings of auction-rate securities will not be priced at a discount in their March statements.
Merrill Lynch said statements with prices for the securities would be posted Monday night, and could be viewed by clients with online access to statements.
UBS decided last week to price clients’ holdings of the securities at a discount to reflect clients’ inability to sell the securities due to failures in regularly scheduled auctions. Previously, clients, though unable to sell the securities, were told they were valued at par.
Merrill’s decision to continue pricing most of the securities at par could hold off an eruption of anger from clients who are already frustrated at being unable to sell their securities. But it carries the risk of being criticized for ignoring a common practice of discounting illiquid securities.
In a conference call with Merrill brokers, a Merrill official said the firm would continue to use third-party pricing services to value auction-rate securities and that most of the securities will be priced at par.
The masses like the status quo. That’s their nature. Sure, whatever they’re taking (paxil, beer, TV) helps. But they like it that way, and if it weren’t in the water, they’d get their fix some other way. Change = pain, same = comfort. Those equations dominate their conscious and unconscious minds. Am I saying anything profound or original? Not by a long shot. But to suggest that the current dumbassification is something new, is just nuts.
It really is weird how distorted everything is right now. Despite these “emergency” -type stories becoming commonplace, you have gold going bearish and the stock market going up between one hundred and three hundred points a day. I don’t think I can even imagine what must be going on in the corridors of political and high-finance power “behind the scenes”.
Uh, correct me if I am wrong, but isn’t the futures market the favorite playground of the PPT?
Tired of reality, go fool with futures!
Tired of high gold and low stock market? Less massive gold futures and use the proceeds to buy US dollars and then Dow Futures! Voila! You have foiled those cranky gold-good-fiat-currency-bad nuts, made the USD go up magically and everyone on Lake Wobegon now has above average Dow Jones returns!
So you don’t forget, intervene before midnight!
So if these securities are not priced at discount in Merrill customer statements, what will par be? ZERO? A negative amount? An April Fool’s joke? How could it be otherwise?
The Can’t Exit a Trade language sounds like a very serious emergency to me (although I must admit I do not exactly understand what auction rate securities are).
But this certainly sounds like a solvency emergency for Merrill Lynch.
Jiggling the numbers only works for so long.
I can smell Merrill’s sweat from here.
The markets are morphing into a mythic creature. An animal similar to a centaur. Except this creature can’t decide if its upper body will be the bear with legs of a bull – or vice versa. Have to come up with a name for this creature. Giving it a name will give it an identity – and we can then poke sticks at it, or tame the wildbeast and make it into a domesticated animal. No longer the boogeyman of our collective nightmare. Yes, I don’t think I’ve realized til lately that this was something that happened in the financial markets in the 1930’s in slo-mo black and white. I think we’re getting a dose of the 1930’s on steroids and in the finest colorchrome imaginable. Things happening too fast almost to grok.
There’s a good Mike Whitney out there today.
Don’t have the link, and can’t go back for ya, the wind is gusting to 50 here. I’ll be shocked if I’m not in a power down tonight.