This is a realization the pot is worthless. Nonetheless, expect to hear clowns screaming about "naked shorts" wrecking Lehman just as they screamed the same nonsense about Bear Stearns.
Action has now shifted to side games as AIG Struggles To Stay Alive, Begs Fed For Cash.
In another side game at least as big as the main game, Bank of America Agrees to Buy Merrill Lynch for $44 Billion.
Bank of America has struck a $44 billion deal to buy Merrill Lynch, according to two people familiar with the negotiations, a merger that will unite the nation"s largest consumer bank with one of its most celebrated investment banking firms.A shotgun Marriage?
Both boards have approved the deal and it is now being reviewed by lawyers, the sources said. Bank of America will pay about $29 for each share of Merrill Lynch stock. A formal announcement is expected tomorrow morning.
I sense a shotgun wedding sponsored at gunpoint by the Fed.
Without this buyout announcement Merrill Lynch would have gotten absolutely crushed tomorrow. That is absolutely certain. The closing price of Merrill Lynch was $17.05 on Friday. Mother Merrill"s market cap was roughly $26 billion.
Thus... Bank of America (BAC) agreed to pay $44 billion for a company that would have been worth $18 billion on Monday"s open, assuming a $5 markdown on Monday to $12. Why?
No one had any cash to buy Merrill other than BAC so what"s the rush?
Various swap-o-rama tables are now in full swing with everyone trying to figure out who is holding what and who the counter parties are, and just what anything is worth, if indeed anything is worth anything at all.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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