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Morgan Stanley considers merger

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Morgan Stanley officials are weighing whether the firm should remain independent or merge with a bank given the recent turbulence in the company's stock, CNBC has learned.

As of late yesterday (Tuesday) Morgan officials were not in merger discussions, according to people close to the matter. But senior people at Morgan concede that further zig-zags in the company's stock price could and possibly will force the company to change course and seek a merger partner, probably a well capitalized bank.

Morgan Stanley CEO John Mack wants to avoid the mistake made by Lehman Brothers CEO Richard Fuld, who brushed aside buyout offers until the market crushed shares of the firm and force it into bankruptcy.

Morgan, analysts say, has a stronger balance sheet than Lehman and recently pre-announced financial results showing profits for the third quarter, and a lower than expected decline of 7.7 percent from the third quarter of last year.

But Wall Street traders are increasingly betting that Morgan might not survive--the costs of so-called credit default swaps which are insurance policies against Morgan defaulting on its bonds, shot up on Tuesday, forcing the company's pre-announcement.

For this reason, Mack is carefully monitoring the market reaction and may indeed decide to do a deal if it looks like the firm could face a liquidity crisis as traders begin to pull funding from the firm.

"Mack isn't going to wait," said one person familiar with his thinking. "If he sees the writing on the wall, he's going to do something".
 
According to Ben, IB with wholesale banking biz model aint gonna work;
I think Mark is acting smart not waiting, not like Mr. Dick , MS with WA , that looks a viable combo.
 
According to Ben, IB with wholesale banking biz model aint gonna work;
I think Mark is acting smart not waiting, not like Mr. Dick , MS with WA , that looks a viable combo.


Just wonder where did you guys get this information :) Maybe I am just working too hard to notice ;) Not even heard about this on trading floor, at least on Fixed Income.
John Mack is smart...but I don't see WaMu is a good choice now if there's a possible. :)
 
I am wondering that such mergers would infact threaten the existence of investment banking.

Once merged the parent banks would be more wary about the activities and put more regulations or restrictions on trades of the company.

Just imagining, will this not reduce the liquidity in market ?

I may be completely wrong as I have no prior knowledge of such stuff. But thats what was the first thought in my mind.

I guess some experts might want to comment on it.
 
According to Ben, IB with wholesale banking biz model aint gonna work;

And yet, everyone's doing it.

There was some discussion months ago about the credit crunch creating a "super" category of IB/Banks. I believe it was suggested by top bank ceo's including Pandit.

Lo, it's happening as we speak.

Hedge funds are the new "investment banks" (nominally speaking). The old guard is become the new guard.
 
Just wonder where did you guys get this information :) Maybe I am just working too hard to notice ;) Not even heard about this on trading floor, at least on Fixed Income.
John Mack is smart...but I don't see WaMu is a good choice now if there's a possible. :)


I wonder too. Is it propaganda or is MS really giving it serious thought.
 
After SEC's emergency halt on short-selling...
MS down 38% , GS down 21% , wow wow wow...
WA = Wachovia, Wamu = WM = dead cat, (sorry, i like the notion of dead cat)
MS + WA is just my own "idea" , sorry... ... I think Mark is racing with time now.
 
After SEC's emergency halt on short-selling...
MS down 38% , GS down 21% , wow wow wow...
WA = Wachovia, Wamu = WM, WM = dead duck,
MS + WA is just my own "idea" , sorry... ... I think Mark is racing with time now.

Halt on naked short selling. Delaying its reimplimentation cost wealth of Fannie, Freddie, LEH, and AIG.
 
GS closed at 154 on last Friday, and now is traded at 106...... MS is down around 37% today. What is going on? Is it really a doom for independent IB?
 
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!!!
 
I think it might be useful to understand the difference between shorting borrowed shares and naked shorting.

In the first instance, there is no inflation of the float. In the second, the inflation is theoretically infinite.

Which sounds more reasonable?
 
Would anyone oppose to working for a retail bank as supposed to the old Lehman, Merrill?
Next year incoming student profile may read like this: "After the completion of MFE, I'd like to work as a quantitative analyst in any of the standing investment banks (if any) or a regional retail bank that now moves into quantitative investment".

The world definitely has changed after last weekend.
 
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's not so trivial; all of these companies access the equities markets when the **** really starts to hit the fan. If the stock price goes down the tubes, they are basically giving the company away, which we saw with Lehman wasn't an acceptable outcome.

As confidence falls, they won't be able to issue bonds at any rate they can handle, and now their two sources of financing are gone!

So, the credit rating must go with the share price as a result.

Under that regime, there's pretty much no hope for these companies, is there?
 
Doug, that's correct. But it looks like share price is weighting more now that in the past.
 
GS closed at 154 on last Friday, and now is traded at 106...... MS is down around 37% today. What is going on? Is it really a doom for independent IB?


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