Friday, January 18, 2008

 

We are very early in the bubble popping process

Merrill Lynch just posted a loss three times greater than expected.

The fourth-quarter net loss of $9.83 billion, or $12.01 a share, compared with earnings of $2.35 billion, or $2.41, a year earlier, the New York-based firm said today in a statement. The loss was almost three times bigger than analysts estimated and resulted in the first full-year loss since 1989, sending Merrill down 10 percent in New York trading, the biggest decline since the 2001 terrorist attacks. [Emphasis added.]


When we have a big bubble and it pops the first to take it on the chin are the money center banks. Then mom and pop take a while to adjust to reality. There are other early warning signs, anecdotal of course.

When “times are tough, you’ve really got to trim the fat in your business, and our software will help you do that”. So said Larry Ellison, chief executive of Oracle, seven years ago – just weeks before a collapse in orders forced him to issue a profit warning, signalling the beginning of a severe tech recession.

Similar bravado has been in evidence this week, even as Wall Street took fright at a cautious forecast from Intel and braced for the fall-out from an economic slowdown in the US, the technology sector’s biggest market. [Emphasis added.]

Very early.

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