Gartman: The Reign of Thain Has Been Anything But Plain

Friday, August 01, 2008 | 10:00 AM

Dennis Gartman pulls even more John Thain Merrill quotes -- and makes it apparent that Mr. Thain is a slickster too clever by half:

~~~

"We do not know John Thain, although we met him once, by accident, on the floor of the NYSE...Handsome fellow, Mr. Thain. Nice crisp suit; starched white shirt; elegant tie; good smile. Good Harvard man as we are told. The problem is, Mr. Thane seems to have a bit of difficulty when it comes to informing investors about the capital situation at his firm, Merrill Lynch, and having seen a compilation of the comments he's made regarding Merrill's "ample" or "sufficient, "or excess" capital we are left to conclude that Mr. Mozilo has nothing on Mr. Thain when it comes to making  misleading statements to the public. Read then the following comments by Mr. Thane to the media over the course of the past eight months... and know that we got them from Reuters, and we owe Reuter's a debt of gratitude for them:

December 24, 2007
One of my first priorities at Merrill Lynch was to strengthen the firm's balance sheet, and today we have made great progress towards that by bolstering our capital position through these investments and our announced sale of Merrill Lynch Capital.

Mr. Thain made this statement when Merrill was announcing an effort to raise $6.2 billion in new capital. One might have felt reasonably assured that that $6.2 billion would be Merrill's last necessary trip to the capital trough. One would have been wrong, however..

January 15, 2008
These transactions make certain that Merrill is well-capitalised.

Mr. Thain made this statement after Merrill had finished selling $6.6 billion of preferred shares to a group of primarily Japanese and Kuwaiti investors. One might have felt reasonably assured that this $6.6 billion would be Merrill's last necessary trip to the capital trough. One would have been wrong, however.

January 18, 2008
We are very confident that we have the capital base now that we need to go forward in 2008.

Mr. Thane made this comment to The New York Times that day. One might have felt reasonably assured that Merrill' capital was unimpaired and that further trips to the capital trough would not be necessary. One would have been wrong, however.

March 16, 2008
We have more capital than we need, so we can say to the market that we don't need more injections. We can confirm that we have tackled the problem

>

 

Mlcap1
Chart via Jake from EconomPic Data

>

This was Mr. Thain speaking to El Pais, a leading newspaper in Spain, and one might have felt reasonably assured that Merrill's capital was sufficient to meet all current and future needs given the clarity of Mr. Thain's comments. One would have been wrong, however.

March 18, 2008
Today I can say that we will not need additional funds. These problems are behind us. We will not return to the market.

Mr. Thain's comment this time was in an interview with France's Le Figaro newspaper, so we can at least say that Mr. Thain has embraced globalisation with some real sense of enthusiasm, and further one might have felt reasonably assured that Merrill's capital was sufficient to meet all demands put upon it. One would have been wrong however.

April 4th, 2008.
In 2007, we lost $8.6 billion after tax, but we raised $12.8 billion in new capital. We raised significantly more capital than we lost. And we did that on purpose so that we could say to the marketplace that we raised more than enough capital. We replaced all the capital we lost. We have plenty of capital going forward, and we don't need to come back into the equity market. The goal is to maintain our current ratings. No more capital raising; I'm sure we have enough capital.

This "capital" idea was put forth by Mr. Thain in an interview with Japan's Nihon Keizai Shimbun, and certainly by being able to raise $12.8 billion in new capital, of which $4.2 was new "net" capital, one might have felt reasonably assured that Merrill's capital picture was clear and certain... finally.  One would have been wrong, however.

Four days later, on the 8th of April, which the world's attention should have been upon the Master's tournament, Mr. Thain said.

We deliberately raised more capital than we lost last year ... we believe that will allow us to not have to go back to the equity market in the foreseeable future.

Mr. Thain made that comment when speaking to reporters in Tokyo, and by now... certainly by now!... one would have felt reasonably certain that Merrill's capital picture was bright and clear. One would have been wrong,

however..

June 17, 2008
Today on a pro forma basis we have about $44 billion of equity capital, which actually isn't very much below the all-time high that Merrill ever had. And our philosophy about this is that we are well-capitalized. We're comfortable with our capital position. We, like everyone else, are deleveraging our balance sheet.

This was Mr. Thain on a conference call hosted by Deutsche Bank explaining some of Merrill's most recent capital market operations. With $44 billion of "equity capital," and assured by Mr. Thain of that fact, one might have felt reasonably assured that Merrill's capital structure was perfected, but one would have been wrong, however.

Finally, on the 17th of July.... only a week and one half ago, Mr. Thain said,

Right now we believe that we are in a very comfortable spot in terms of our capital.

Sadly, it was not just Mr. Thain that has caused the capital markets a bit of confusion.  Merrill's President, Mr. Greg Fleming, said of him that

John Thain has been very clear that we have sufficient capital and don't have a need to raise additional common equity for the foreseeable future. When we raised this capital in January, we had a lot of demand so we went beyond what we needed.

The fact is, no they did not, for Merrill was back in the market yesterday. looking for new and permanent capital. They found it in Temasek... fortunately. One might feel reasonably assured.... Well, you get the picture!.

~~~

Don't these CEOs know that whatever they say to the media creates a permanent transcript?

Friday, August 01, 2008 | 10:00 AM | Permalink | Comments (29) | TrackBack (0)
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Wow. So this is what Thain (and other "Music Man" type hucksters) get paid their mega-millions to do? Most of these folks are merely highly paid car salesmen with lofty pedigrees and expensive suits.

Anyone who now dives into buying this stock gets NO sympathy from me. They deserve everything they get.

Posted by: Jeff | Aug 1, 2008 10:13:32 AM

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