Recent Blog Posts
-
The Times' Rorshach Geithner Story
Apr 27 20099:04am EDT -
Sinking Animal Spirits
Apr 27 20098:04am EDT -
Counter-cyclical Urban Policy
Apr 26 200910:04am EDT -
Be Your Own Counterfeiter
Apr 26 20099:04am EDT -
Being Tim Geithner
Apr 25 200912:04pm EDT -
Notes From a Press Conference Naif
Apr 25 20099:04am EDT -
What Good is the News?
Apr 25 20098:04am EDT -
Stressful Enough
Apr 24 20092:04pm EDT -
Not Regretting the Pound
Apr 24 20091:04pm EDT -
Introducing the New Ford Squeeze
Apr 24 20099:04am EDT -
Non-Economic Questions of the Day
Apr 24 20099:04am EDT -
The Stress Test Blind Alley
Apr 24 20098:04am EDT -
Happy Hour
Apr 23 20099:04pm EDT -
Recovery Without Rebalancing
Apr 23 20096:04pm EDT -
The Shape of Your Recession
Apr 23 20095:04pm EDT
Links
- Felix Salmon
- DealBreaker
- Ryan Avent: The Bellows
- The Epicurean Dealmaker
- Chris Anderson
- Ultimi Barbarorum
- MarketBeat
- Michelle Leder
- John Quiggin
- The Panelist
- Andrew Leonard
- Streetsblog
- Brad Setser
- Michael Mandel
- Financial Crookery
- Kash Mansori
- Dean Baker
- Calculated Risk
- Free Exchange
- Curbed
- Lance Knobel
- Econospeak
- Carbon Tax Center
- Overcoming Bias
- Mark Thoma
- Naked Capitalism
- Alphaville
- Barry Ritholtz
- Alexander Campbell
- The Bayesian Heresy
- Brad DeLong
- DealBook
- Greg Mankiw
- Deal Journal
- FP Passport
- Carl Bialik
- Marginal Revolution
- A Fistful of Euros
- Dan Gross
The Sunny Side of Morgan Stanley's Earnings
Morgan Stanley's stock price might be down today in the wake of disappointing earnings, but I don't think that these results really counteract the relatively good news from Lehman brothers yesterday, and I still have that weirdly good feeling I started getting after the rate cut yesterday.
Morgan Stanley is mainly a victim of Really Bad Timing on the part of John Mack, its CEO: he jumped feet-first into the risk pool just as all the liquidity was draining out of it, with painful and predictable consequences. The bank used a lot of its own capital to underwrite very large loans, which meant that it ended up having to write off $940 million after it couldn't sell those loans to anybody else. What's more, Morgan Stanley, like Goldman Sachs, behaves sometimes like a big quantitative hedge fund, and those strategies cost it another $480 million thanks to the quant bloodbath over the past couple of months.
On the other hand, investment banking revenues grew by a very impressive 45% to $1.4 billion, and asset-management fees increased 61% to $1.36 billion. Obviously, those growth rates aren't sustainable in the wake of a credit crunch. But Morgan Stanley remains a golden franchise which should be able to find its way back into the market's good graces without too much difficulty: after all, this is the first time that Mack has disappointed.
