Breaking News from MoneyNews.com

Breaking News from MoneyNews.com

Wall Street Shaken as Merrill Is Sold, Lehman Files for Bankruptcy Protection

Bank of America, the biggest retail bank in the U.S., reached an all-stock deal on Sunday night to acquire Merrill Lynch & Co., the largest brokerage firm, for $50 billion or $29 a share. Merrill had reported $52.2 billion in losses and write-downs from subprime mortgages.

Meanwhile, early Monday morning, Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank and the biggest underwriter of mortgage-backed securities at the height of the U.S. real estate market, joined the list of other investment banks like Bear Stearns Cos. that couldn't survive the credit crunch.

The 158-year-old Lehman filed for Chapter 11 bankruptcy protection after Barclays Plc and Bank of America Corp. abandoned takeover talks. The company had lost 94 percent of its market value this year.

According to Bloomberg, it was the largest bankruptcy filing in U.S. history. Lehman employs about 25,000 people worldwide and listed more than $613 billion in debt.

But Lehman is not ready to throw in the towel. The Wall Street Journal reported that Lehman Brothers is still trying to sell its U.S. broker-dealer and investment management businesses.

Meanwhile, American International Group, the largest insurer in the U.S., says it plans to announce a restructuring plan that will include selling off part of its business to raise cash and boost investors' confidence.

The Federal Reserve and a global consortium of banks have stepped in fast to head off a worldwide panic on stock and other financial exchanges. They announced a $70 billion pool of funds to lend to troubled financial companies.

Editor's Note: We Warned You First of the Housing Crisis. Protect Your Portfolio Now.

Ten banks — Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS — have agreed to provide $7 billion each "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."

In addition, the Federal Reserve announced late Sunday that it was broadening the types of collateral that financial institutions can use to obtain loans from the Fed.

If only investors could read the headlines in advance.

Somebody knew that mortgage giants Fannie Mae and Freddie Mac were doomed. If they didn't have inside information, they certainly had a strong gut feeling that the feds would move in and take over.

Now the stocks, once high-fliers with multi-million dollar lobbyists and huge executive salaries, are on the verge of delisting. American taxpayers are stuck with the dregs, again.

What if you knew months ago that banks stocks would fall? That housing was in trouble? Would you have invested differently?

Of course you would have. And you would invest differently right now if the headlines of tomorrow were right here, in front you, in black and white.

Of course, if you had been reading Moneynews.com and its sister publication, Financial Intelligence Report (FIR), you would have known all about the banking and housing mess — three full years ago! And about the oil collapse we are seeing unfold now. And the dollar's return to prominence after months in the cellar.

Editor's Note: Don't Let the Liquidity Crisis Sink Your Stocks!

We're not making idle boasts. Here are the headlines as they appeared in FIR.

Several years ago, Sir John Templeton warned us on housing, saying that "a 50 percent drop off in prices is quite possible."

Latest: Adjusted for inflation, housing is down 24 percent so far, and housing guru Robert Shiller warns that 30 percent is possible. Of course, in overheated markets like Las Vegas and parts of California, 50 percent was right on the mark. And nobody has dared call a bottom for housing yet.

As early as 2005, we said gold could be on the verge of its greatest bull market in more than three decades. At the time, gold had already soared to an 18-year high of $480.25 an ounce — a $45 increase from the beginning of the year. It was just beginning, reported FIR.

Latest: Gold topped $1,030 an ounce in March, then fell back to its historical, inflation adjusted average, in the mid-$800 range. Now experts warn that gold mines won't add capacity unless they see prices over $1,200 an ounce, something sure to push gold higher still.

In December 2007, we reviewed our previous forecasts and found that every single one had come true: the housing bust was under way, credit was contracting, the dollar collapsed, and gold rose. Two other calls — stagflation and a general stock market decline — are unfolding now.

Latest: Let's touch just on those last two, stagflation and stocks. Inflation popped in July to 9.8 percent at the wholesale level, the biggest 12-month rise since 1981. The economy is eking out growth and heading for a serious slump soon. Need we mention in detail the massive hit that the Dow has taken?

In early 2008, we concluded in FIR that the dollar’s decline had bottomed out. The big gains that investors have reaped in recent years betting against the dollar will likely not be seen in the near future.

Latest: The dollar just hit a fresh 12-month high against the euro.

In May 2008, FIR reported on the inevitable China slowdown, and the risk of rising inflation even if its red-hot economy cools.

Latest: Treasury Secretary Henry Paulson, writing in Foreign Affairs, warns of an impending collapse in the Chinese economy, and Morgan Stanley Asia Chairman Stephen Roach is fretting that, even with slower growth, inflation soon will roar in the communist nation.

All the way back in 2004, we told investors that oil would spike from $29 to as high as $70 a barrel within 18 months. Then it doubled again. When oil topped out at $140 a few months back, we immediately called the collapse.

Latest: Oil is fast heading toward $100 a barrel. As the United States, Europe, and even China hit the brakes, there's little to keep oil buoyant and much pushing it downward.

You need to know what the best financial minds in the world are saying. Time and again, readers of FIR have been steps ahead of the crowd, helping investors to protect themselves from one crisis after another. The housing crisis, rising oil prices, liquidity crunch, the inflation lie, the baby boomer crisis, and much more. We also advised investors years ago that commodities were set to take off, and those who took our advice cashed in big time with most commodities rising close to 300 percent to 500 percent since that time.

Many have profited — preserved their life savings and significant portions of their family’s wealth — by reading FIR. Can you afford to be without this type of valuable information in today's volatile economic and political climate?