August 28, 2007 (LPAC)--"There has been no good place to hide during the month of August, which must surely go on record as one of the industry's most hair-raising ever," wrote Guy Moszkowski a Merrill Lynch & Co. analyst as he recommended the companies rivals be lowered from a "buy" rating to "neutral." He co-authored a report entitled "Differentiation Escalates," in which the case was made that Merrill rivals, Lehman Brothers Holdings Inc., Bear Stearns Cos. and Citigroup Inc. could be expected to pile up losses on mortgage bonds and leveraged loans, as well as from a slowdown in investment banking, reported the London Financial Times and Bloomberg today.

The ripple of subprime foreclosures was key to Moszkowski's rating downgrade. Lehman and Bear Stearns, the fourth- and fifth-biggest U.S. securities firms, will be hurt because of their dependence on debt markets, and Citigroup may be pinched by loans and leveraged-finance commitments, Moszkowski wrote in a note to investors today, according to Bloomberg.com. He also cut his profit estimates for these firms and JPMorgan Chase & Co. Stocks fell for all four after this "news" got out. The already wounded Lehman Brothers stock value has dropped 29% and Bear Stearns' is down 33% this year. So much for investor confidence in the asset-backed securities.

While the stock market, especially, investment banks began a new race to the bottom on this Merrill Lynch report, a desperate Carlyle Group infused its Guernsey, U.K.-based credit-investment affiliate with another -- its second of late -- $100 million loan just in case market volatility continues.

Meanwhile, the world's largest hedge fund, Renaissance Technologies with assets at $30 billion and by billionaire James Simons, let it out that it may sell a minority stake to a big investor and/or group of investors, according to the Financial Times. The FT straight-faced, wrote that "Renaissance may believe the crisis in the US credit markets and global flight to safety among investors will be short-lived" so there's "ample opportunity" to keep earning." This "bullishness" by Renaissance is in the face of a growing line up of funds, AQR, KKR etc. desperately trying to hold together deals as the credit markets dry up.