Morning Update (11-09-30): Is Morgan Stanley in Trouble
So far, this week (especially yesterday) we have seen some of the craziest movements in stock prices around the world. To me this is indicating a lot of trouble ahead.
FT Alphaville: All is not well in the kingdom of Stanley
All is not well in the kingdom of Stanley. The CDS spreads have blown out and the market is concerned. Very, very concerned. Moody’s Analytics is here to tell us all about why that is.
The first [concern] is the exposure of MS to European institutions and the second is the level of trading revenues in the third quarter. MS reported in its second quarter earnings call that net exposure to the GIIPS countries was $5 billion on a gross and $2 billion on a net basis. However, some sources have recently focused on their FFIEC1 reported gross exposures of $39 billion to French banks, which we believe overstates their actual risks significantly.
Two weeks ago I mentioned on MMGL that one of the least talked about, but much concerning news is the break in Hong Kong’ Hang Seng stock index, which is down another 2.3% today to 17592 (down 30% from a peak of 24988 set in early 2011).
It is a reflection of troubles in China’s economy. Sorry Farid Zacharia, you haven’t done your homework – like most of the western economies, China is also doomed. This is a case of (crony) capitalism and socialism (ironically, socialism with a market economy) going bust simultaneously. From Zer0 Hedge:
This is an emergency announcement for bubble watchers: China CDS has soared to 194.5 bps, +14.5 in the past few hours (a trend first noted here about a week earlier), the biggest relative mover in the sovereign realm, which has just hit the widest it has been since March 2009.
These two items are enough for us to be concerned. Very concerned. A financial tsunami is coming our way. Be prepared!
Banks hurried to leave the TARP program early so that they can pay their execs as much as they wanted. Why doesn’t this surprise me? (Via Huffingtonpost):
In the wake of the financial crisis, a number of the nation’s largest banks were excused from the government’s rescue program before they had returned to a position of complete financial security — in part because they wanted to avoid restrictions on how much their executives would get paid, according to a new report from the program’s government overseer.
Citigroup, Wells Fargo, PNC and Bank of America successfully lobbied to leave the federal bailout program early in 2009, even though the Federal Reserve Board and the Federal Deposit Insurance Corporation had recommended they take additional steps to shore up their assets, according to a new report from the Special Inspector General for the Troubled Relief Asset Program, a government watchdog office.