Thursday, 18 September 2008 05:00

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, ABR = average broker recommendation):

(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...



(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


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

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.

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 ABR query and report your findings back to the blog.

Last modified on Thursday, 18 September 2008 05:00