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Two Ways To Play: Merrill's Mojo


Writedowns not withstanding, shares are getting a boost.

According to Bloomberg, Merrill Lynch (MER) CEO John Thain said the firm's sour subprime mortgage investments were a problem that didn't just rest with Merrill, but the industry, and that board members should be spared criticism based on 20/20 hindsight.

Thain hinted at shifting the blame to the ratings agencies, saying the securities were "at least purportedly AAA-rated securities." The company has disclosed over $30 billion of writedowns on these securities with $26 billion still remaining on the books. Last week, Moody's said it may cut Merrill's credit rating citing adverse market conditions and a possible $6 billion in further writedowns. Nonetheless, shares of Merrill are getting a boost today after the company said it's maintaining its $0.35 quarterly dividend.

From the Bull Pen: Bulls cannot disregard the strength in the financial sector today: There are multiple options. Professor Jeffrey Cooper mentioned a possible tag on Goldman Sachs (GS) to its overhead 100 DMA and Professor Quint Tatro is riding the "fins" using the XLF.

From the Bear Cave: The cause for concern in the Bear Cave is that credit markets are showing continued signs of stress even as the equity markets continue to trade to session highs. Professor Bennet Sedacca describes the scenario as "quite the cat fight." We've mentioned the Ultrashort Financials (SKF) and bears can consider the $100 level as a decent risk/reward entry.
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No positions in stocks mentioned.

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