How Merrill Lynch Managed The Market's Expectations: Lies, Let-Downs And Leaks

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So Merrill Lynch beat the lower expectations it put out into the market yesterday by taking only $7.9 billion in writedowns for collateralized debt obligations and U.S. subprime mortgages. Of course that's much higher than the $5.5 billion write down they said they'd be taking a month ago, but this time they promise they really mean it. Some analysts are already saying they are confident that this time Merrill threw in the "kitchen sink" and won't be taking further write-downs. Which totally makes sense, because what are the odds they'd be spectacularly wrong twice.
The stock moved up as news of the much-worse-than-projected-but-not-as-bad-as-whispered losses spread. DealBreaker's Closing Bell, CNBC's Charlie Gasparino and the Wall Street Journal had all reported that losses would be higher than projected but it seems that the New York Times came closest to pinning the tail on Stan O'Neal. Tuesday afternoon it reported that Merrill was already expecting about $2.5 billion in losses on top of the $5 billion it had announced earlier this month.
And how did the Times come so close? Well, apparently, they came so close because Merrill told them wha the numbers would be. Or told someone who told the Times, which is pretty much the same thing. DealBook, the blog of the the Times business section, reports this morning. "And where did those figures come from? Merrill itself, via undisclosed sources."
And, actually, Merrill still managed to miss the number leaked to the Times. Or did things get $400 million worse overnight?
Both journalists and investors are now questioning whether Merrill Lynch has been...uhm, what's the polite word? Oh, right...forthcoming enough about it's losses. (The impolite way of saying it is that they seem to have been dishonest about its losses.) As Charlie Gasparino pointed out, when he was reporting three weeks ago that the losses would be worse, the bank's spokespeople did it's best to dampen that story and claimed that losses would be in line with the $5 billion it had put out a month ago. This morning on Squawk Box, Gasparino more or less questioned why anyone would want to start believing Merrill now given their past behavior.
Oh, and over at Market Beat, David Gaffen is listening to the earning's call so you don't have to.
And coming up in a few moments, Bess Levin gives us more...uhm, well, is "analysis" the right word? She gives us more of that thing she does but aims it at Merrill.
Earnings Release [Merrill Lynch]
Earnings Release [Merrill Lynch; pdf file]
Financial Spreadsheet [Merrill Lynch; Excel file]
Managing Expectations of Merrill’s Losses [DealBook]
Live-Blogging the Merrill Conference Call [Market Beat]

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