People are still pessimistic about Merrill Lynch, which seems to be imploding right before our eyes. It apparently still has a lot of CDO and subprime exposure, enough that analysts are wondering whether another massive write-down is coming for the 4Q. Michael Mayo of Deutshce Bank, says Merrill could write down an additional $4 billion for the quarter. CDOs and subprime bonds remain the main culprit. That First Franklin purchase now looks like a massive bet that's not working out. These securities will come under more pressure from ratings agencies downgrades. At some point, it seems like they will have to be marked much lower. Hopefully, that can be done in an orderly fashion. According to the Financial Times, Merrill has cut its CDO exposure to about $15 billion from $32 billion and its subprime exposure to $5.7 billion from $8.8 billion. That's still a lot of exposure.  

For more:
- here's the Financial Times article
- here's an AP article on Mayo's note to clients
- UBS warns of more subprime fallout. Article  

Related article:
- Merrill to buy First Franklin for $1.3 million