CEO's Willl Never Learn (MER),(GE),(WB)

“We deliberately raised more capital than we lost last year … we believe that will allow us to not have to go back to the equity market in the foreseeable future,” Merrill Lynch (MER) CEO John Thain

This statement comes the same week both G. Kennedy Thompson at Wachovia (WB) and Jeff Immelt at GE (GE) were force fed prior statements along the same lines and shares in their companies were savaged. Thompson said Wachovia’s dividend was safe and Immelt said GE’s earnings were “in the bag”.

What does Thain gain with the proclamation? Nothing. No one believes what comes out of banker’s mouths today anyway, why say it?

It get’s even worse when just hours later he clarified the statement to mean “raise additional cash through equity”. Super, nice job John. Close the door and then go back and open it up a crack.

Now he either will be forced to take a bad deal on a debt offering or asset sale to raise cash if necessary in order to save face. If he does another equity or preferred sale, his reputation at the bank and with shareholders is crushed even before it has a chance to grow. Let’s say he is right? So what? That and $5 will get him a latte’ and Starbucks (SBUX). Had Merrill be forced to tap equity markets again, it would have been bad but now if they do, Thain will most likely be getting his resume updated.

Thain had absolutely nothing to gain by making the proclamation…….nothing. He now has created an atmosphere in which those so inclined (CNBC’s Charlie Gasparino) are going to make sport out predicting when Merrill will need more cash and how they will get it.

I always thought rule #1 was “under promise and over deliver”. Thain ought to see the example set by Berkshire’s (BRK.A) Warren Buffett

Disclosure (“none” means no position):Long WB, None