MS logics

I don't get it. MS monday/tuesday....then they post superb earnings with virtually no writedowns......then they release the news that they are seeking mergers.

That being said, I don't get why it's taking such a huge hit since MER was bought out with whopping 50% permium. I was under an impression that MS is more sound than MER. any logical explanations? Or funds enjoying their last day of naked shorting? lol

 

and how the hell is MER holding up better than GS and MS?

 

The market is being highly irrational. Free market capitalism is no longer determining prices and risk.

 

Paulson is helping his buddy Thain.

 

IMO the market didnt like this because MS and GS were the untouchables. then all the sudden equity investors realized how wrong they were been and it changed their perspective of what else that think its true that its not quite so

 

probably the only explanation.

 

THE BUCKINGHAM RESEARCH GROUP:
Morgan Stanley eported 3Q08 EPS of $1.32, ahead of consensus of $0.78 and our estimate of $0.73. Results included a
surprisingly large $1.45bn of MTM gains on liabilities. Excluding this gain, we peg EPS at $0.81 – still
solid. Overall, MS had better-than-expected results in equities trading and investment banking, while most
other areas were in line (i.e. no negative surprises).
• After excluding liability gains, $745m gain on MSCI shares, and $1.6bn in write-downs/ARS charges, we
peg a normalized EPS figure for the quarter of $1.11. This translates into a 14% ROE. Solid when
considering the negative environment and well above a similarly normalized ROE for GS of 10% this
quarter. And this ROE comes on top of a Tier 1 capital ratio of 12.7%, the highest among its peers and
100bps higher than GS. MS also has a liquidity pool of $175bn, higher than GS’s $102bn.
• We believe MS’s solid results reflect a better business mix in the current turbulent environment, with 30%-
35% of revenues from the steadier wealth mgmt. business and less reliance on proprietary positioning. At
less than 1x book, we believe the stock is undervalued, particularly when considering that GS trades at a
35% premium. That said, we expect trading results to remain challenged through the end of 2008 given
ongoing disruptions in the credit market, which is likely to keep the stock volatile as well. But we believe
MS’s book value is sound and why we maintain our Accumulate rating. Raising FY2008 EPS estimate to
$4.65 from $4.40, although trimming 2009 EPS estimate by $0.20 to $6.00.
Target $51.00

MS’s long term capital and liquidity position remains solid. MS noted that its regulatory Tier 1
capital ratio increased to 12.7% during 3Q from 12.4% during 2Q. In addition, management stated
that total liquidity increased to $175bn at the end of 3Q, up from $169bn at the end of 2Q. In terms of
leverage, MS continued to reduce the size of its balance sheet during the quarter, which helped drive
the net leverage ratio to 12.9x from 14x at the end of 2Q (and down from 16x at the end of 1Q08).
Looking ahead, we expect MS to continue to grow equity during 4Q and into 2009, given limited
buybacks and declining write-downs. Combined with limited balance sheet growth and conservative
investing, we expect MS to maintain a high liquidity and low leverage profile in the near term.

September, 17 2008

 

Sept. 18 (Bloomberg) -- Morgan Stanley, the second-largest independent securities firm in the U.S., jumped in late New York trading after members of Congress signaled that the government may create an agency to inject capital into financial companies.

The stock, which had dropped 49 percent in the last eight trading sessions, climbed 3.7 percent to $22.55 at 4:07 p.m. in New York.
....

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, this week proposed Congress create a federal entity to buy bad loans. Senator Hillary Clinton of New York, a former candidate for the Democratic nomination for president, proposed resurrecting a 1930s-era agency to stem foreclosures.

``We need a modern day Home Owners' Loan Corporation,'' Clinton said in remarks at the Senate today. ``There will not be any semblance of a normal or orderly market'' without ``quarantining'' the devalued loans outstanding, she said.


Mack's Meeting

Morgan Stanley's Mack, 63, addressed employees this morning in a crowded meeting in New York, saying the firm's earnings and balance sheet were sound, according to people who attended or watched the firm-wide video broadcast. He said Morgan Stanley was in stronger shape than Lehman or Bear Stearns.

Morgan Stanley also blamed short sellers for pushing down the shares. Three U.S. Securities and Exchange Commission rules that took effect today aim to reduce manipulative trades betting on a drop in share prices.

Chairman Christopher Cox said in a statement late yesterday that the SEC may require hedge funds to disclose their short-sale positions and plans to subpoena the funds for their communication records.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQF5_jnA5SwI&refer=home

 

U.S. Stocks Rally Most in Six Years on Plan to Shore Up Banks

By Elizabeth Stanton

Sept. 18 (Bloomberg) -- U.S. stocks rallied the most in six years on prospects the government will formulate a ``permanent'' plan to shore up financial markets, while regulators and pension funds took steps to curb bets against banks and brokerages.

....
``Any actions regulators or other entities or players take to try to slow down the bear raids will be received positively,'' said David Katz, chief investment officer of Matrix Asset Advisors in New York, which manages $1.4 billion. ``There's no reason a Goldman Sachs or a Morgan Stanley should be forced to sell themselves in a shotgun wedding if they've got economic models that work, and they do.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5SOK1vsQl50&refer=home

 

SEC Halts Short Selling of Financial Stocks
September 19, 2008 7:12 AM EDT

The Securities and Exchange Commission, acting in concert with the U.K. Financial Services Authority, today took temporary emergency action to prohibit short selling in financial companies to protect the integrity and quality of the securities market and strengthen investor confidence.
The Commission’s action will apply to the securities of 799 financial companies. The action is immediately effective.

SEC Chairman Christopher Cox said, "The Commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets. The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets. This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury, and the Congress."

Today’s decisive SEC action calls a time-out to aggressive short selling in financial institution stocks, because of the essential link between their stock price and confidence in the institution. The Commission will continue to consider measures to address short selling concerns in other publicly traded companies.

http://www.streetinsider.com/Hot+List/SEC+Halts+Short+Selling+of+Financial+Stocks/4003236.html


September 18, 2008 3:28 PM EDT

Morgan Stanley applauds Attorney General Cuomo for taking strong action to root out improper short selling of financial stocks. By initiating a wide-ranging investigation of this manipulative and fraudulent conduct, Attorney General Cuomo is showing decisive leadership in trying to help stabilize the financial markets. We also support his call for the SEC to impose a temporary freeze on short selling of financial stocks, given the extreme and unprecedented movements in the market that are unsupported by the fundamentals of individual stocks.

http://www.streetinsider.com/Press+...and+FSA+Actions+on+Short+Selling/4001895.html