Morgan Stanley Has Bigger-Than-Estimated Loss; China to Invest $5 Billion

Discussion in 'Wall St. News' started by ASusilovic, Dec 19, 2007.

  1. Morgan Stanley, the second-biggest U.S. securities firm, reported a fourth-quarter loss of $3.56 billion, the first in the company's history, after $9.4 billion of writedowns on mortgage-related investments.

    Chief Executive Officer John Mack is forgoing a bonus for the year and called the results ``deeply disappointing.'' Morgan Stanley obtained a $5 billion investment from China Investment Corp., the nation's sovereign wealth fund, the New York-based company said today in a statement.

    Mack's strategy of expanding in home loans and making bigger trading bets backfired as the firm's losses from securities linked to home loans more than doubled in November. He ousted Co-President Zoe Cruz, who had overseen the fixed- income unit responsible for the mortgage holdings, last month and promoted James Gorman and Walid Chammah, who previously ran wealth management and the firm's European operations.

    ``Conditions have deteriorated,'' said William Fitzpatrick, who helps oversee $1.7 billion, including Morgan Stanley shares, as a financial-services analyst at Optique Capital Management in Racine, Wisconsin, before the results were announced. ``It's going to get worse before it gets better.''

    The loss of $3.61 a share in the three months ended Nov. 30 compares with net income of $1.98 billion, or $1.87 a year earlier. Analysts were estimating a loss of 39 cents, according to a survey by Bloomberg.

    Morgan Stanley joined competitors including Merrill Lynch & Co., Citigroup Inc. and Zurich-based UBS AG in booking losses from investments in securities, such as c]ollateralized debt obligations, that contain subprime home loans.

    1) Some USD repatriation going on 2) Seems USD / China tightening "free trade" business relationship Ha, ha, ha....:D :D :D
  2. Hmmm. Not sure what this development means, in light after (failed?) SED talks. Perhaps when the chinese wanted high technology, they didn't realize we were going to share with them our 'financial innovation.'

    Is this good or bad? I have no idea.
  3. I think China is great, great to step in now and share in the losses to come! Misery loves company. LMAO
  4. DJ 9:42 Morgan Stanley back office and P&S to settle all transactions in Yuan

    VL, 12.19.2007
  5. Racine, Wisconsin? Has everyone in NYC gone on vacation? MS will serve kung pow chicken at their Christmas Party.
  6. :D :D :D
  7. Daal


    what I find most amusing is seeing the stock rally after every shareholder lose 10% of their ownership in the company
  8. RhinoGG

    RhinoGG Guest

    Ahh yes...
    Chickety China, the Chinese Chicken.
    Have a drumb-stick and the head starts tickin'.
  9. da-net


    Thought you might enjoy the commentary. This is a quote from Larry Levin S&P Trader;

    " China Rising"

    Dear Trader,

    Last week I wrote "I have noticed a disturbing trend. Citigroup's stock had to be (temporarily) rescued by Saudi money. UBS needed a huge cash infusion from the government of Singapore and unnamed "middle East money." The FOMC was able to cajole the BOE, BOC, Swiss Bank and European Union to "inject liquidity" into the system for the benefit US banks. And now the Bank of America has warned of larger fourth-quarter losses than previously projected. Who will come to its rescue? Communist China ? Unfortunately, it seems like investment banks (especially in the US ) and the Federal Reserve, are going out with their hat in hand asking, 'Brother, can you spare a dime?'" What a prescient statement indeed! The communists have "come to the rescue" of a major US investment bank, but it wasn't Bank of America that needed the money, it was Morgan Stanley.

    In the latest sign that the credit crunch is getting worse, Morgan Stanley admitted to an additional $5.7 billion of CDO-related assets, taking its total fourth-quarter loss to nearly $10 billion. I believe this will be the first quarter in Morgan Stanley's history that it will have a quarterly loss. WHAT? I thought this was an investment bank, ferchissakes, not a bond investor!

    Morgan's CEO made the following statement this morning, "The results we announced today are embarrassing. This loss was the result of an error in judgment that occurred on one desk, in our Fixed Income area and also a failure to manage that risk appropriately." He also said he was turning down a bonus for 2007. How nice of him. After all, the entire CDO debacle, including the enormous risk undertaken, came straight from the CEO himself. The mere fact that he was even offered a bonus is offensive to shareholders.

    What might also be offensive to current shareholders is the new investor mentioned earlier: the communist government of China . Today's $5-billion bail out, I'm sorry - investment, puts the communist control of Morgan Stanley at nearly 10.0%, which is the #2 investment bank in this country. The Chinese government will be paid a fixed annual rate of 9% and convert into Morgan Stanley common shares in 2010. The current shareholders, however, are only being paid 2%.

    When I scanned the financial press after the pit closed, I couldn't find a single negative comment about the financial-love-coupling between the commies and Morgan Stanley. In fact, it was quite the opposite: most approve of the new arrangement. What do you think about this? Before you answer, think of it carefully.

    My thoughts come down to this: How would these same supporters of this financial duo have reacted to the US government owning 10% of Morgan Stanley? The outcry from Wall Street would be deafening! So if you answered that it is "ok" like the so-called experts did, but US government ownership would be bad - why? Is it because the US government can't run much properly or profitably (think of the Post Office, IRS, FEMA, etc)? If that's true and you're for the CIC investment, then you must believe the Chinese government does things right. I suppose we shouldn't talk about Chinese communist sponsored slave labor or murder-for-medical-body-parts at its prison camps. Yeah, let's save that for a bed time story.

    Apparently Warren Buffet was correct when he recently said in an interview, "Over time, if you keep shipping $2 billion a day out of the country, as we do, of assets, you put pressure on the dollar, and that's what's happening." He went on to say (loosely quoted), " America is for sale all across the globe."

    We can hear it now, from the US to Europe to Japan, "Attention K-Mart shoppers, excuse me, foreign shoppers; we have a red tag sale on all mortgage insurance companies and a blue light special on all investment banks!" Boy, that mega-phone must be as big as the grand-canyon!
  10. I am sick of tire of communist this, communist that. You can refer the country as the China or PRC China. People living in China has more freedom than those of us living in US, the country that promote democracy. Our government just promotes and invaded other countries in the name of democracy. Just take your head out of your a$$ and look around see how much freedom we left? How much information the government is withholding from us that seal away in the name of national security.
    #10     Dec 20, 2007