Brokerage Heads Whistling Past the Graveyard

Alfred E. Neuman was famous for saying “What-- Me Worry?”

The legendary wise guy was a well respected seer, on par with Jamie Dimon and the rest of the bulge bracket jokers…

A few weeks after Merrill Lynch & Co. CEO Stanley O’Neal said he saw ``no clear signs’’ that rising delinquencies on subprime U.S. mortgages were hurting the rest of the debt markets, borrowing costs for non-investment grade companies rose to the highest in nine months. ServiceMaster Co., US Foodservice and 19 other companies have canceled bond sales because nobody wants to buy them. Bloomberg

Stan is not the only one putting on a brave face. Perhaps the exec’s should glance at the chart of Goldman Sachs, which might sober them up a touch. Speaking of Goldman, CFO David Viniar claimed on the June 14th conference call that “subprime continues to be weak” and yet “there’s very little effect on other credit markets”

To be fair, David was not the only Wall Street executive dismissing the growing debacle.

“we continue to believe that subprime market challenges are and will continue to be reasonably contained.”- Lehman CFO Christopher O’Meara

The declining value of subprime bonds was ``a challenge’’ for the firm, ``it hasn’t spilled into other areas of the market.’’ - Bear Stearns Cos. CFO Sam Molinaro

“not even a sharp downturn in one market today necessarily portends financial disaster in another.” - Merrill Lynch CEO Stan O’Neal

The cartel is spinning a good yarn, even as they are overshadowed by Harry Potter. Speaking of hocus pocus, sentiment could be the one elixir that holds the tape together. At least one guy is willing to admit as much:

“The biggest risk we face, and there are a lot of things that contribute to this risk, would be a very big crisis in the credit markets,’’ he said at a June 27 conference. ``Some of that is supply-demand fundamentals, but a lot of it is sentiment.’’

Yes, Lloyd Blankfein, I could not agree more. And with mortgage related assets generating over $27 billion in revenue last year for the brokers, what else do you expect them to say.

Caveat Emptor?

CEO’s See “No Clear Signs of Crisis as Woes Intensify
Bloomberg
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in any securities mentioned above

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