October 8, 2007 (LPAC)--Speculation is rife as to the extent of the losses of the world's large investment banks, in the wake of the announcement of earnings losses and writedowns by the largest, Citigroup. A piece in Sunday's Financial Times points to evidence that the cancer is indeed spreading. The Times quotes Sanford Bernstein saying that JP Morgan is likely to admit losses of "about" $1.4 billion, and writedowns "on mortgages and mortgage-backed securities," of $700 million, for a total of about $2.1 billion. At the Bank of America, Bernstein estimates loan losses will be $700 million, and writedowns $300 million, for a total of $1 billion. This is in addition to announced losses of $5 billion for Merrill Lynch, $3.7 billion for (Swiss) UBS, $3.1 billion for Deutsche Bank, and $2.7 billion for Citigroup.

After a bad third quarter, banks (and the market) are trying to put forward the notion that the worst is now over, and "everything will get better." Analyst Douglas McIntyre, and LaRouche PAC, of course, think differently, with McIntyre bluntly stating in his column that in the fourth quarter, "The mortgage problems are going to get worse.... The problems in private equity are not going away." He speculates on the likelihood of further losses and writedowns in each area. "The earnings meltdown is not over for the banks," he says. "They just have not forecast how much worse it can get."

As for the hedge funds, "hedge fund of funds" manager Giles Conway-Gordon in California sees big withdrawals coming. Investors are likely to pull as much as a half a trillion, $500 billion, or about a quarter of their [admitted] asset base, away from the jet-setting playboys. This would lead to the collapse of a "large number" of the funds, he told the Times, within the year ahead. "I think we are going to see a very sharp Darwinian process in the next six months," he said. "Things have been too easy for too long and I think cold winds are about to blow."