12:00PM New York – Bond insurers fell sharply as worries mount on the capital adequacies.

Bond and mortgage insurance companies took another plunge after MBIA, Ambac Financial, and PMI Group fell sharply.

Ambac Financial (ABK: chart) fell 51% or $6.56 to $6.32 after it ousted its chief executive. The company’s plan to raise capital of $1.0 billion may not be sufficient. Sub-prime mortgage market continues to deteriorate and obligations of these bond insurers keep rising.

Ambac has insured $555 billion of bonds. To preserve its AAA rating AMbac may have to seek more capital according to the rating agency Moody’s.

MBIA ((MBI: chart) dropped 33% or $4.41 to $8.99 and the PMI Group fell 14% or $1.11 to $6.66.

MBIA raised $1 billion in the January offering by offering surplus notes with a claim on its future earnings. The notes have fallen sharply in the last three days of trading and now trade below 85 cents to a dollar.


10:00AM New York – Merrill Lynch recorded $15 billion write down related to subprime loans.

U.S. market averages edged higher at the opening despite sharp sub-prime related losses at Bank of New York Mellon and Merrill Lynch.

December housing starts fell to a seasonally adjusted annual rate of 1,006,000, 14.2% below the revised November estimate of 1,173,000 and is 38.2% below the revised December 2006 rate of 1,629,000. The December rate for units in buildings with five units or more was 196,000.

Privately-owned housing completions in December were at a seasonally adjusted annual rate of 1,302,000, 7.7% below the revised November estimate of 1,411,000 and is 31% below the revised December 2006 rate of 1,887,000. Single-family housing completions in December were at a rate of 1,009,000, 12.0% below the November 1,146,000 completion.

The December rate for units in buildings with five units or more was 278,000. An estimated 1,500,200 housing units were completed in 2007. This is 24.2% below the 2006 completion of 1,979,400.

Home builders edged higher in the morning after the report. Toll Brothers, D R Horton, Lennar, and Beazer Homes edged between 1% and 3% higher.

Merrill Lynch (MER: chart) today reported a net loss from continuing operations for the full year 2007 of $8.6 billion, or $10.73 per diluted share, a sharp reversal from net earnings from continuing operations of $7.1 billion, or $7.17 per diluted share for 2006.

Merrill Lynch’s net loss for the full year 2007 was $7.8 billion, or $9.69 per diluted share, significantly below net earnings of $7.5 billion, or $7.59 per diluted share for 2006.

Net revenues for 2007 were $11.3 billion, down 67% from $33.8 billion in 2006, while the 2007 pre-tax loss from continuing operations was $12.8 billion compared to pre-tax earnings from continuing operations of $9.8 billion for 2006.

For the fourth quarter of 2007, net revenues were negative $8.2 billion, down from $8.4 billion in the prior-year period, and Merrill Lynch’s fourth quarter 2007 pre-tax loss from continuing operations was $14.9 billion.

The net loss from continuing operations for the fourth quarter was $10.3 billion, or $12.57 per diluted share, down substantially from net earnings from continuing operations of $2.2 billion in the prior-year quarter.

Merrill Lynch’s net loss for the fourth quarter of 2007 was $9.8 billion, or $12.01 per diluted share, significantly below net earnings of $2.3 billion, or $2.41 per diluted share for the 2006 fourth quarter.
Merrill recorded losses from collateralized loans of $11.5 billion in the fourth quarter after recording losses of $7.9 billion in the third quarter.

At the end of the fourth quarter, book value per share was $29.37, down from $41.35 at the end of 2006. Including the impact of the equity and equity-related transactions which closed subsequent to year end, Merrill Lynch’s pro forma book value per share would be $30.30 at the end of 2007.