The recent buy of Merrill Lynch by Bank of America over a week ago supposedly kept Merrill from failing and filing for bankruptcy. Merrill Lynch has billions of dollars in bad debts from the sub-prime market. Merrill Lynch posted loses for the past 4 quarters and has wrote down $40 billion in loses.
The buy of Merrill Lynch was originally valued at $50 billion but reduced to a final purchase price of $40 billion.
It is shocking how the deal occurred in just 2 short days. It makes one wonder how can a deal be that sound if it occurred in that short amount of time. Bank of America’s interest in Merrill was due to Merrill Lynch’s investment banking services. Both companies offer different products and services to their customers which could cause a potential problem in the future.
For investors, Bank of America would exchange 0.8595 shares of Bank of America stock for each Merrill Lynch share of stock. If you currently have investments in Merrill Lynch now is the time to diversify your portfolio to protect yourself from severe market losses. However, don’t make any drastic changes.
The Securities Investor Protection Corporation protects cash and securities, such as stocks and bonds held by customer at a financially troubled brokerage firm but does not protect you the same as the FDIC. Check with your financial advisor to see what options are available to you.
Remember, it’s now what happens day to day, it’s how long you stay in the game. Your money double every 72 months so just ride it out.
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