Thursday, 18 September 2008 01:00

As I said, the Riskiest Bank on the Street

For all of those who had/have a buy on Morgan Stanley, contact me for a special institutional subscription to the blog. I have said Morgan Stanley is a very strong short candidate (for about 9 months now).

Wall Street has said the following (from Zacks.com, ABR = average broker recommendation):

MORGAN STANLEY
(NYSE) $21.75


Current ABR 2.27
ABR (Last week) 2.27
# of Recs in ABR 11
Average Target Price: $51.60
LT Growth Rate 10.40%

Let's see what John Mack, Morgan's CEO says behind closed doors... In the NY Times :

Only a day earlier, Morgan Stanley defended itself from growing doubts about its future, issuing a fairly positive earnings report (Nottt!!) to ward off concerns about its health. But the fear that gripped markets after Lehman Brothers failed also enveloped the firm.

Seeking to avoid the kind of fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley’s chief executive, made an unsuccessful effort on Tuesday evening to persuade Citigroup’s chief executive, Vikram S. Pandit, to enter into a combination, according to people briefed on the talks.

“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit, according to two people briefed on the talks. Mr. Pandit, a former senior investment banker at Morgan Stanley, said Citigroup was not interested. It is thinking of deals it can strike with consumer banks, like buying the struggling Washington Mutual out of bankruptcy if its reported efforts to auction itself should fail, that would provide it with cheaper deposit funding. A Citigroup spokeswoman declined to comment.

Having failed at that, Mr. Mack entered into discussions on Wednesday with Wachovia and several other banks, people briefed on those discussions said. The talks with Wachovia are preliminary and a deal may not emerge. The banks declined to comment.

Let's take a look at the Golden Boys:

Look at what I said vs what the guys that most retail investors and family offices give their money says...


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GOLDMAN SACHS GROUP INC
(NYSE) -114.50
Current ABR 2.96
ABR (Last week) 2.79
# of Recs in ABR 12
Average Target Price: $200.91
LT Growth Rate

17.40%


This is the verbage (that's verbage, not garbage) that accompanies these reports via hyperlink:

li.lowa { list-style-type: lower-alpha; }

Recommendations Research Page


Brokerage Research firms spend over a billion dollars a year to fully
analyze and recommend stocks to their clients. Most of that expense is
paid out as compensation to a group of highly intelligent, and well
compensated, equity analysts. It is usually in your best interest to
know what these Wall Street heavy weights think about your stocks
before you make buy, hold, sell decisions. And there is no better place
to gather that information than on the Recommendations research pages
on Zacks.com.

Okay bloggers and bloggettes, this doesn't make any
damn sense.Why would anyone not want to subscribe to truly independent
research is beyond my reckoning. Mediocre independent research is
better than top notch biased research any day. Just imagine what
mediocre biased research will offer you.

I know I may be a little biased on this topic
because I may stand to gain from selling subscriptions, but let me make
this very clear - I am an investor first and foremost. That is what I
do all day, everyday. The blog always has, and probably always will,
operate at a significant loss.The only reason I am bothering to make this post is because I am absolutely awed by the stickiness engendered by the sell side brokerage marketing machine. One would think that this site (or any independent research site) would be oversubscribed, if anything just because there is chance they may be trying to tell the truth. Okay, rant and rave is now offline...

If one were to consider the downloadable reports and analytical html posts that
I offered for free to be recommendations akin to the Zacks chart above, the following would be the
approximated cash returns.


Blog
post date
Companies negatively Blogged Price as of Blog Date or
following trading day
6/23/2008 % change Assumed Holding Period in Months Holding Period Return
2-Sep-07 1-Sep-07 len $28.57 $12.72 (55.48%) 12.57 103.65%


hov $12.60 $7.14 (43.33%) 12.57 81.18%


ctx $29.12 $14.72 (49.45%) 12.57 93.41%


dhom $2.08 $0.55 (73.56%) 12.57 141.62%

1-Sep-07 bzh $11.29 $6.55 (41.98%) 12.57 78.48%

1-Sep-07 bsc $114.13 $9.43 (91.74%) 12.57 174.30%


cfc $19.81 $4.25 (78.55%) 12.57 151.60%

3-Sep-07 mbi $61.92 $9.71 (84.32%) 12.50 163.15%


abk $64.63 $5.77 (91.07%) 12.50 176.65%

8-Sep-07 wm $34.74 $2.01 (94.21%) 12.53 182.94%

16-Oct-07 ryl $23.96 $23.76 (0.83%) 11.27 (3.82%)

19-Dec-07 ms $50.08 $21.75 (56.57%) 11.27 107.65%

8-Jan-08 ggp $33.90 $20.37 (39.91%) 11.27 74.33%

19-Feb-08 leh $53.57 $0.13 (99.76%) 6.97 196.94%

8-Feb-08 ago $21.57 $13.04 (39.55%) 7.33 76.52%


ms $45.28 $21.75 (51.97%) 7.33 101.36%


wfc $31.69 $33.43 5.49% 7.33 (13.56%)


gs $177.36 $114.50 (35.44%) 7.33 68.31%


wb $34.72 $9.12 (73.73%) 7.33 144.89%
long 17-Mar-08 bsc $4.81 $9.33 93.97% 6.03 180.18%

27-Mar-08 kfn $12.71 $6.53 (48.62%) 5.70 94.67%

2-Apr-08 jef $17.15 $19.31 12.59% 5.53 -27.76%

15-May-08 pnc $69.39 $71.96 3.70% 4.10 -9.98%
doo-doo list 22-May-08 bpop $11.52 $8.00 (30.56%) 3.87 58.54%


wm $9.45 $2.01 (78.73%) 3.87 154.89%


cfc $4.69 $4.25 (9.38%) 3.87 16.19%

16-Jun-08 ge $28.97 $23.39 (19.26%) 3.07 35.95%














Average Average






7.82 75.62%

I would like everyone to mail this post to anyone who thinks shorting investment banks should be halted. With a performance recored like the one's stated above, it is no wonder why managment finds their own investment performance to be a magnet for short sellers. Feel free to run any stock in blog table above through the Zacks.com ABR query and report your findings back to the blog.

Last modified on Thursday, 18 September 2008 01:00

8 comments

  • Comment Link Jarret Pazahanick Thursday, 18 September 2008 22:34 posted by Jarret Pazahanick

    In your wildest dreams could you have expected the event of the last 24 hours to occur or are you looking at this as good news and a good opportunity for those strong willed to do even better.

    Report
  • Comment Link YOU GUys ARE NUTS Thursday, 18 September 2008 22:27 posted by YOU GUys ARE NUTS

    All short sellers, including many of you here, are FUCKING SCREWED.

    The SEC is going to ban short selling. Not just naked short sell. But ALL SHORT SELL.

    This is SO FUCKING DUMB! They're going to kill the hedge funds and options houses!

    Report
  • Comment Link Jarret Pazahanick Thursday, 18 September 2008 13:50 posted by Jarret Pazahanick

    Not sure if everyone has seen this but would seem to affect HSBC for the good in the short term (or the bad in my case)

    Financials were helped by word that the Financial Services Authority, the United Kingdom's independent financial regulator, has issued a temporary ban on short selling financial companies. Dow Jones reported the FSA will not allow the creation or increase of net short positions in publicly quoted financial companies from the 2300 GMT. The provisions will last until January 16

    Report
  • Comment Link Reggie Middleton Thursday, 18 September 2008 13:27 posted by Reggie Middleton

    I wouldn't hold my breath waiting for that combination, Shaun, but if it does come to pass you and I will be wrestling for those puts :'(

    Report
  • Comment Link shauns noll Thursday, 18 September 2008 12:47 posted by shauns noll

    i dont care how they do it, if MS and WB merge i will sell my kidneys and buy puts, that will be the short of a lifetime, the riskiest bank on the street is going to get saved by the crappiest option adjustable rate mortgage bank?! YOU CANT MAKE THIS STUFF UP! hahah. that is like two drowning people grabbing each other to stay afloat, if it goes up to 30$ then i'l take that loss and then short the combined entity and make 3054651354x my money back, god i hope that happens!

    Report
  • Comment Link TampaRick Thursday, 18 September 2008 11:11 posted by TampaRick

    shaunsnol,

    I believe this merge is a suicide. My questions is if the MS executives can arrange for a merge into Wachovia using (manipulating )the transaction so it looks like a purchase of MS at, let' say $30/share, even if the entire thing implodes a week after. This guys are sneaky and they may be considering every option. Just wondering...

    Report
  • Comment Link shaun noll Thursday, 18 September 2008 10:52 posted by shaun noll

    you think that the riskiest bank on the street is going to be saved by an option adjustable rate mortgage bank?! if those two merge i bet reggie buys MORE puts, i know i woudl!

    Report
  • Comment Link TampaRick Thursday, 18 September 2008 10:04 posted by TampaRick

    Reggie,
    How do you think the MS will react behave on the merge news with Wachovia? Would you sell your PUTS?

    Thanks

    Report
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