Morgan Stanley considers merger

[Andy Nguyen]

Yeap, that's what Mack just said on CNBC. He blames the short sellers.

 

[Eddie]

We are in the midest of a market contrilled by fears and rumors, and the short-selling is driving down the stock prices...

I actually like what's happening right now, though pretty painful, but a good thorough ( at least i hope it's thorough) cleasing process - deleveraging... ...back to your core business folks...

So the big hedge funds like Bears and Lehman are gone, s o r r y , I mean investment banks; AIG is in goverment's hand and in the process of unwinding in some form , monoline insurers tided themselves up a few months ago, and those who couldn't were, gone. MS and GS are under attack but I believe they will stand , in one form or another.

I think the corner is not far away...

 

[bob]

I don't think the short-selling is the issue. IMHO, on of the problems reside on the rating agencies that are using stock price to issue a rating, as in price is low = low confidence = they probably don't have enough balance sheet = need to downgrade.

It means if I'm/we're big hedge fund mgr(s) with good connections, I/we can start short selling up the neck and try to bring down the price => the price goes down => agency sees this => lower ratings => price goes further down => me and my bodies making money like there is no tomorrow.... today is financials, tomorrow who knows!!!

Sure. Add in a nice pile of CDS protection and you have a trading strategy--one that it's clear a lot of folks have been using in the recent past.

The really cynical thing to do is to use some of the excess cash generated by this piracy and buy the target's bonds once their yields are driven up over 20%. Then, as in AIG's case, you essentially have government-backed debt at 30 cents or so on the dollar. Pretty sweet.

 

[Eddie]

I don't think the short-selling is the issue. IMHO, on of the problems reside on the rating agencies that are using stock price to issue a rating, as in price is low = low confidence = they probably don't have enough balance sheet = need to downgrade.

It means if I'm/we're big hedge fund mgr(s) with good connections, I/we can start short selling up the neck and try to bring down the price => the price goes down => agency sees this => lower ratings => price goes further down => me and my bodies making money like there is no tomorrow.... today is financials, tomorrow who knows!!!

Just watched cnbc interview one of SP guy, shocking, since when they incorporate the stock price in credit rating of the company!!! WoW, that's novel, just like the vicious circle alain potrayed, with these kind of rating methodology, you can fabricate a downward spiral once things started sliding,
...

 

[Yan He]

Yeap, that's what Mack just said on CNBC. He blames the short sellers.

If you have one day left ever to short selling, or to close to short position, what are you going to do?

work hard to lower the target stock price---->...

 

[doug reich]

I still don't buy this shorting spiral theory as its own component. There's a saying that you "can't fight the tape" -- shorting more stock will usually just cause you to lose more money if you're trying to manufacture a disaster.

That's not to say that with these other legs to stand on, especially strong anxiety about the company's solvency, shorting can't help bring down the house.

 

[Yan He]

Stocks To Watch Today : Morgan Stanley Down 34%; CNBC Stokes Merger Rumors

Let's see how it will go

 

[alain]

I still don't buy this shorting spiral theory as its own component. There's a saying that you "can't fight the tape" -- shorting more stock will usually just cause you to lose more money if you're trying to manufacture a disaster.

That's not to say that with these other legs to stand on, especially strong anxiety about the company's solvency, shorting can't help bring down the house.

What you say is true in normal conditions but when fear takes over, things are totally different. Remember, people are not as rational as you think. Fear, greed and herd behavior takes over sometimes.

 

[GusTsahas]

What I find ironic is the trading firms complaining about naked short selling have been the prime brokers responsible for enabling hedge funds to short naked for years. It must add insult to injury knowing that "someone" is profiting from their unfortunate circumstance as they've been on the other side of this trade for years and know the dealing going on!

 

[Navnitbariar]

This is no GOLF - True Gentleman's game. Darwin Theorizes "Survival to the Fittest"..... as long as u stand the heat...you'r in if you cannot.... you should not. No offences this is just a personal comment

 

[Navnitbariar]

what I dont understand is ......can protection selling activities (CDS's) put so much pressure on a firm like Morgan that it starts looking for Merger options. Do they mainly have Trigger Debts....? any comments

 

[Eddie]

Not so much so of the CDS on their books, more to do with how they're rated by SP and hence the perceived capital requirement and their ability to raise capital.

 

[Uncle Max]

The New York Times reported, citing people familiar with the matter, that Morgan CEO John Mack told Citigroup chief Vikram Pandit that "we need a merger partner or we're not going to make it." However, the report said, Pandit wasn't interested. Earlier in his career, Pandit spent more than two decades at Morgan.

CNBC said Morgan's talks with Wachovia are indeed taking place and moving toward an advanced stage. At the same time, Morgan is continuing to seek capital from the Chinese government, possibly by selling part of the company to a Chinese bank, the report said. The network also indicated that Mack has lobbied top officials from the Federal Reserve and the Treasury Department for their approval for a China deal. China's sovereign wealth fund, China Investment Corporation, owns 9.9% of Morgan, and Bloomberg said the fund might try to lift its stake to 49%.

On Tuesday, after Morgan and Goldman reported their quarterly results, both executives said they didn't need or plan to look for merger partners right now.

 

[Stefan Zota]

Exceptional jump for both GS and MS.
MS jumped from 16 to 22 in less than 30 minutes ... 37.5%

 

[Yan He]

Really a tough day for us here: everyone check Bloomberg almost every mins though we are more confident after this morning's Town Hall held by John Mack. MS went down to $11.6 around noon when the whole floor were quiet and holding breath.

Is this Resolution Trust Fund going to save the market?

 

[Stefan Zota]

I think in the end, the fear spreaded among short-sellers made the difference.
Cuomo came out that he will chase all false short-selling.
SEC said they will regulate it more and I think there is a rumor that short-selling practice will be similar to UK for financials.

Huge relief here, at least for now =D>=D>=D>

 

[Uncle Max]

Britain's financial regulator said Thursday it was temporarily banning the short-selling of shares in financial companies that are listed on the London Stock Exchange.

I don't think that ban of short selling will improve situation. People are waiting for details on Resolution Fund. It's kind of unfair for Lehman and Merill though. They could've used this fund as well. And here is usual question: who is going to pay for this fund.

 

[Andy Nguyen]

We live another day to tell our children that "I survived the crash of 2008"
Too bad, all the SEC short selling rules came too late for LEH and ML.

On a lighter note, WSO in a newsletter today mentioned that all the analysts at LEH, on they way out of the building, stopped by the cafeteria and used the pre-paid card to buy chocolate, candy, drink, food, anything that is not nailed down. Can't blame them right? Their equity option in the firm is now worthless.

 

[Yan He]

I don't think that ban of short selling will improve situation. People are waiting for details on Resolution Fund. It's kind of unfair for Lehman and Merill though. They could've used this fund as well. And here is usual question: who is going to pay for this fund.

Tax-payer ?

 

[Yan He]

We live another day to tell our children that "I survived the crash of 2008"
Too bad, all the SEC short selling rules came too late for LEH and ML.

On a lighter note, WSO in a newsletter today mentioned that all the analysts at LEH, on they way out of the building, stopped by the cafeteria and used the pre-paid card to buy chocolate, candy, drink, food, anything that is not nailed down. Can't blame them right? Their equity option in the firm is now worthless.

Survived the turmoil
I think what follows should be more strict regulations...

LEH employees look fine since the official of Barclay buy... 10,000 might what percentage of NY employees?