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Cue from Merrill

Positive news from Wells Fargo last night combined with SEC restrictions on naked short selling gave the markets a steriod boost. Tonight we will see whether Merrill Lynch has anything positive to say about its writedowns on losses.

Consensus on second quarter writedown is between $6-6.5billion but surely the markets will evaluate the following:

• the size of the writedown
• whether estimates are at the mark

The second point is very important because it is going to tell us whether insiders have a good grasp of the true extent of losses involved.

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US Crisis

Picture this:

1. Fed says will rescue Fannie and Freddie
2. To do so, they will borrow money by issuing more treasuries
3. Therefore foreigners will fund the rescue
4. Question: Does foreigners want to fund more US debt?

Read the following:

• US faces global funding crisis
• Sovereign funds cut exposure to US Dollar
• Japan mortgage exposure seen over $95 billion