As we wait for Merrill's conference call to begin in a few minutes, traders are wondering what could be said that would move the stock off its lows. Note that despite Merrill's big writedown, its exposure to CDOs and the subprime market remains fairly substantial.
At quarter end, CDO-related exposure stood at $15.2bn. Although that was down more than 50% from the start of Q2, it is still substantial exposure. Sub prime exposure was $5.7bn, down 35%, but again still substantial.
Goldman Sachs noted that "Given the lack of liquidity in CDOs, we believe it will be tough for Merrill to further reduce its exposure near-term and the firm could become a victim to overall market trends in CDOs."
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