...Merrill has vacillated between wanting a big presence in fixed income and commodities to pulling back, and then flooding back into the space. It piled into derivatives in the last couple of years, seeing an opportunity to stake a big claim. It piled into subprime mortgages last year at the peak of the housing market, buying lender First Franklin (nasdaq: FFHS - news - people ) in December from National City (nyse: NCC - news - people ) for $1.3 billion.Analysts say the company's in overall good shape, despite the third-quarter loss. (And O'Neal's not doing too poorly, either; although a Merrill spokeswoman said he wouldn't receive a severance package, his retirement benefits and stock awards total around $160 million.) The company may report more losses in the fourth quarter, but if the board redfines it corporate strategy, sticks to it, and chooses a successor wisely -- someone who knows better how to value its balance sheet and manage its risks, who doesn't treat the company like his own personal piggy bank -- Merrill can recover.
O'Neal has more recently expressed regret for those moves, saying, as he did in 2002, that the firm had moved too far, too fast.
"They are the next trade guys," quipped analyst Richard Bove of Punk Ziegel, of Merrill's hummingbird approach to the business. "They can't hold onto a strategy. They need to stumble on something they can embrace."