Morgan Stanley (MS)

[rock lili]

shares of Morgan Stanley (NYSE:MS) moved down 5.47% to end the trade at $14.16.

http://www.usamarketvoice.com/finance/7610/all-three-major-us-indexes-starts-the-week-in-red-on-eu-concerns.html

[rock lili]

Morgan Stanley Settles on $1.1 Billion Charges against MBIA ..........Morgan Stanley (NYSE:MS) decided to surrender insurance claims versus MBIA Inc (NYSE:MBI) in reutrn for a $1.1 billion payment from the poor insurer, snapping a two-year legal battle over guarantees on mortgage bonds.

Source Link: http://www.usamarketvoice.com/latest-happenings/7539/morgan-stanley-settles-on-1-1-billion-charges-against-mbia.html

[tvsoccerdad]

MS Bonds rally most improved beating goldman

[$King]

52 MIL VOL

[$King]

HOD 15.9

[$King]

LOD 14.98

[$King]

MS + 7%

[hdsstocks]

testestest

[tvsoccerdad]

Rally MS should reach 20 by next week

[hdsstocks]

DIE MS

[MinnieM]

I'm holding puts at the moment... don't really care which direction it goes... just like to catch the ride for a bit here and there.

Puts may be a bit of a gamble at the moment, but, I'm up thus far.

[$King]

i agree always watching ;)

[MinnieM]

It's an interesting trader...

[$King]

MS LOD 15.44

[gmoney123]

I want to trade this... If it dips low again to around 15 I will buy buy buy lower than 15 and in all in

[qwertzuiop]

i will keep this on Radar in November!

[qwertzuiop]

Am i the only 1 trading MS this month here? dont see posts lately

[qwertzuiop]

We are going UP again. great!

[J_Hamel]

HERE WE GOOOO

[MWM]

Morgan Stanley, Goldman Credit Risk Soars

By Mary Childs and Shannon D. Harrington - Oct 3, 2011 5:22 PM ET .

The cost to protect the debt of Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) surged to the highest levels since the weeks after Lehman Brothers Holdings Inc.’s bankruptcy as concern intensified that Europe’s debt crisis will infect the global banking system.

Contracts on Morgan Stanley, the New York-based owner of the world’s largest retail brokerage, soared 92 basis points to a mid-price of 583 basis points as of 4:30 p.m. in New York, the highest since October 2008, according to London-based data provider CMA. Those on Goldman Sachs increased 65 basis points to a mid-price of 395.

Traders pushed the cost of protecting banks and U.S. companies higher after German Finance Minister Wolfgang Schaeuble opposed moves to increase the scale of the euro rescue fund, complicating efforts to prevent a Greek default. Swaps on Bank of America Corp. (BAC) jumped to a record and a measure of U.S. corporate credit risk rose to the most since May 2009.

“It’s such a difficult situation for the markets here,” Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ in New York, said in a telephone interview. “People are primed for bad news. They’re quick to believe the worst.”

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses or speculate on creditworthiness, climbed to the highest since May 2009, adding 6.7 basis points to a mid-price of 150.9 basis points as of 5:10 p.m. in New York, according to index administrator Markit Group Ltd.

The index, which typically rises as investor confidence deteriorates and falls as it improves, has increased from 136.2 on Sept. 27 as concerns mount that Europe’s fiscal imbalances are worsening.

Mitsubishi Commitment

Five-year credit-default swaps tied to Charlotte, North Carolina-based Bank of America’s senior debt climbed 33 basis points 457, according to CMA, a unit of CME Group Inc. that compiles prices quoted by dealers in the privately negotiated market.

Contracts on American International Group Inc. (AIG) surged 76 to 545, the highest since May 2010, CMA prices show.

The cost to protect Morgan Stanley’s debt has risen from 305 basis points on Sept. 15 and is at the highest level since October 13 2008, four weeks after Lehman Brothers Holdings Inc. filed for bankruptcy. It reached as high as the equivalent of 1,300 basis points on Oct. 10 of that year, CMA prices show. It now costs $583,000 annually for five years for every $10 million of debt insured.

‘Dirty Word’

“Investment banks are largely black-box businesses, so in a world where risk is a dirty word, they are going to be punished in the capital markets,” Joel Levington, a managing director of corporate credit at Brookfield Investment Management Inc. in New York, said in an e-mail.

Mitsubishi UFJ Financial Group Inc. said today it’s “firmly committed” to its long-term strategic alliance with New York-based Morgan Stanley. The Tokyo-based bank said it was reiterating its commitment to the firm “in response to recent market volatility.”

“The special relationship we have formed remains core to our global business strategy,” Mitsubishi UFJ said in the statement.

Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

[MWM]

Sounds like 0 might be coming...

[$King]

MS @ 13.51

MS $10 coming

[MWM]

Two very interesting articles...

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67605842


http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67605925

[canestsal]

Morgan Stanley Shares Plunge: Epic Liquidity Crisis

From Forbes with Mark Gongloff of Bloomberg.

Morgan Stanley, Bank of America and JP Morgan may only have months of liquidity left

By Mark Gongloff

Bloomberg

One of the things rattling Morgan Stanley’s stock price today was a draft note by Bloomberg economist Joseph Brusuelas that discussed reasons for the company’s wide CDS spreads.

The note, which Mr. Brusuelas says was never meant for external consumption, had an error about the company’s net exposure to French banks.

It turns out that note had another error, too, in its estimate of the size of the bank’s derivatives exposure.

In the note Mr. Brusuelas suggests Morgan Stanley has $1.793 trillion in notional derivatives contracts outstanding, linking to an OCC report with that data. Liquidity at Morgan Stanley could rapidly be shrinking.

But a closer look at that report reveals that Morgan Stanley’s notional outstanding is actually much, much bigger — about $56 trillion in total. Mr. Brusuelas’s number includes only the exposure of Morgan Stanley’s commercial bank operations, which are very small, and misses the exposure of its holding company.

What’s also missing, however, is the context that this is not an unusually large derivatives exposure among the Too Big to Fail Set. J.P. Morgan has about $79 trillion — trillion, with a T — in notional derivatives contracts outstanding, for instance.

Finally, these gigantic numbers represent the notional value of underlying contracts. The net exposure is actually much, much smaller. J.P. Morgan’s total credit exposure, according to the OCC report, is about $360 billion.

That’s still a huge number — but a little more in the realm of normal human numbers than $78 trillion. We don’t know the comparable number for Morgan Stanley because OCC doesn’t give it.

[MWM]

I don't sit on a buy and hold, I play vol, that is what I look for period. Not to mention the wide range is even more of an indicator that their is trouble at MS...

[10nisman]

MS had a $17 to $12.50 range over the last few weeks, what crack are you smoking? Better than C, WFC, JPM, GS and any big name fin out there...

You clearly didn't look at the 1 month chart that I posted - MS has outperformed GS, JPM, JEF, C, BAC over the past month. MS has been more volatile (wider range) however its share performance over the past month on percentage terms has outperformed its friends.

[MWM]

Which large fin would you have made more money on with a short?

MS had a $17 to $12.50 range over the last few weeks, what crack are you smoking?

Better than C, WFC, JPM, GS and any big name fin out there...

Your a Jack, GL!

[10nisman]

I told you that I saw something weird going on with MS 1 month ago and it wasn't showing up on the charts and now the CDS spreads are blowing up and every single media outlet is blabbing about it. How about just saying nice call... Yet again today it is down more than any US financial... But thats ok, keep defending your explanations of why it's in the same boat as all the other fins...

Haha... Over the past month you could have made more money shorting any of the other financials I listed. So, what is the nice call on? Finishing 5th in a 5 man race? MS has been more volatile (i.e., bigger down and up moves relative to its friends), yet you only care to talk about it on down days.

BTW, had you said you expected MS CDS spreads to blow out then you would have made a great call but you didn't. You stated you saw something weird going on and now because some moronic media outlet is blabbing about it you must be a genius.

[MWM]

I told you that I saw something weird going on with MS 1 month ago and it wasn't showing up on the charts and now the CDS spreads are blowing up and every single media outlet is blabbing about it.

How about just saying nice call...

Yet again today it is down more than any US financial...

But thats ok, keep defending your explanations of why it's in the same boat as all the other fins...

[10nisman]

Have you looked at the one month chart of MS compared to its friends (GS, JEF, JPM, C, BAC, etc.)? Who has performed the best?

http://finance.yahoo.com/echarts?s=JEF+Interactive#chart7:symbol=jef;range=1m;compare=ms+gs+bac+c+jpm;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

[MWM]

10nisman






Share

Wednesday, September 21, 2011 11:37:50 AM



Re: MWM post# 93






Post # of 115



Quote:
--------------------------------------------------------------------------------
Nope, on several days it has lead the % gains down compared to it's friends. Trust me, I've been watching. You can't tell just by lookng at a chart... trading much worse to it's direct competitor GS too...
--------------------------------------------------------------------------------

Haha. So you cannot tell by looking at the charts yet you post charts? That's genius. MS is more volatile than its larger friends however the return performance has been largely the same. Look at the performance of MS, GS and JEF over the past month. MS also announced leadership changes last week which could have led to some its recent volatility.

http://finance.yahoo.com/echarts?s=MS+Interactive#chart12:symbol=ms;range=1m;compare=gs+jef;indicator=volume

[10nisman]

Yep I guess all that was just a figment of my imagination, glad you correted my outlandish guesses lol!

I don't recall correcting any of your outlandish guesses, although I do remember correcting your comment that MS was downgraded (which was not true) and the fact you missed the majority of the downside move in financials which started in late winter/early spring.

[MWM]

Yep I guess all that was just a figment of my imagination, glad you correted my outlandish guesses lol!

Morgan Stanley's CDS spread soars. The cost of acquiring credit-default swaps to insure Morgan Stanley's (MS) debt has soared to 456bp, higher than the cost of buying swaps for some major French and Italian banks. Morgan Stanley's CDS spread is still well below a post-Lehman peak of 1300bp, but nonetheless at its highest level since March 2009, as fears of French bank exposure heighten investor caution.

[MWM]

Morgan Stanley Seen as Risky as Italian Banks

Morgan Stanley (MS), which owns the world’s largest retail brokerage, is being priced in the credit- default swaps market as less creditworthy than most U.S., U.K. and French banks and as risky as Italy’s biggest lenders.

The cost of buying the swaps, or CDS, which offer protection against a default of New York-based Morgan Stanley’s debt for five years, has surged to 456 basis points, or $456,000, for every $10 million of debt insured, from 305 basis points on Sept. 15, according to prices provided by London-based CMA. Italy’s Intesa Sanpaolo SpA (ISP) has CDS trading at 405 basis points, and UniCredit SpA (UCG) at 424, the data show. A basis point is one-hundredth of a percent.

“The CDS spreads are making investors and creditors nervous” about Morgan Stanley, said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York who rates the company’s stock “outperform,” in an e-mail.

The price of Morgan Stanley credit-default swaps has continued to climb even though the firm’s shares have risen this week. The stock jumped 93 cents, or 6.6 percent, to $15.09 in New York Stock Exchange composite trading yesterday, the fourth- biggest gainer in the 81-member S&P 500 Financials Index. Shares are down 45 percent since the start of the year.
Implied Risk

Moody’s Analytics, an arm of Moody’s Investors Service that’s separate from the company’s credit-rating business, said in a report yesterday that Morgan Stanley’s CDS prices imply that investors see the bank’s credit rating as having declined to Ba2 from Ba1 in the last month. The company is actually rated six grades higher at A2 by Moody’s Investors Service.

By comparison, Bank of America Corp. (BAC) and France’s Societe Generale (GLE) SA, which have CDS trading at 403 basis points and 320 basis points respectively, have prices that imply a rating of Ba1, higher than the implied rating on Morgan Stanley, said Allerton Smith, a banking-risk analyst at Moody’s Analytics in New York.

Mark Lake, a spokesman for Morgan Stanley in New York, declined to comment.

Morgan Stanley was the biggest recipient of emergency loans from the Federal Reserve during the financial crisis and also benefited from capital provided by Tokyo-based Mitsubishi UFJ Financial Group Inc., now the biggest shareholder, and the U.S. Treasury, which it repaid with interest.
2008 Peak

While the price of Morgan Stanley’s credit-default swaps is at the highest level since March 2009, it’s nowhere near the peak reached in 2008. On Oct. 10 of that year, the annual price for five-year protection rose to the equivalent of 1,300 basis points, according to data provided by CMA, a unit of CME Group Inc. that compiles prices quoted by dealers in the privately negotiated market.

The credit-default swaps market can be thinly traded, and the recent jump in prices may reflect no more than a single big counterparty seeking to hedge contracts, said Hintz, a former Morgan Stanley treasurer. Morgan Stanley, one of the biggest traders of CDS among U.S. banks, doesn’t make a market in its own swaps, according to Smith of Moody’s Analytics.

The CDS market has features “that may not exist in other markets like the bond market or the equities market,” Smith said in a telephone interview. Having fewer participants trading in the Morgan Stanley name could result in a “disproportionate spread movement,” he said.

The daily average trading volume in Morgan Stanley shares over the last three months is 27 million shares, according to data compiled by Bloomberg. By contrast, a three-month study released this week by the Federal Reserve Bank of New York found that most single-name CDS trade less than once a day, while the most active trade more than 20 times per day.
Swaps Volume

Trading in Morgan Stanley credit-default swaps has risen recently to 257 contracts last week, compared with 187 for Goldman Sachs Group Inc. (GS), according to the Depository Trust & Clearing Corp. That compares with a weekly average of 73 trades in Morgan Stanley and 91 in Goldman Sachs in the six months that ended on Aug. 26, DTCC data show.

There was a net $4.6 billion of protection bought and sold on Morgan Stanley debt as of Sept. 23, according to DTCC. Even with the higher trading volume, investor skittishness in the face of Europe’s sovereign debt crisis may be leaving few market participants willing to sell CDS protection to meet the demand for hedges, said Hintz.

“With the EU teetering, few other firms are going to jump in and write CDS on a global capital markets player like MS,” Hintz said in his e-mail, referring to the European Union and to Morgan Stanley’s stock-market ticker symbol.
Trading Decline

The rise in Morgan Stanley’s CDS prices may also relate to an expected decline in third-quarter trading revenue or to the company’s exposure to French banks, Smith said.

Ruth Porat, the bank’s chief financial officer, said at an investor conference on Sept. 13 that the fixed-income trading environment in the third-quarter was worse than 2010’s fourth quarter, when Morgan Stanley posted its lowest debt-trading revenue since the 2008 crisis. The company, led by Chief Executive Officer James Gorman, 53, reported second-quarter revenue from both investment banking and fixed-income trading that beat rival Goldman Sachs for the first time on record.

Morgan Stanley had $39 billion of cross-border exposure to French banks at the end of December before accounting for offsetting hedges and collateral, according to an annual filing with the U.S. Securities Exchange Commission. Cross-border outstandings include cash deposits, receivables, loans and securities, as well as short-term collateralized loans of securities or cash known as repurchase agreements or reverse repurchase agreements.
‘Galloping Wider’

While Morgan Stanley hasn’t updated those figures, Hintz estimated in a Sept. 23 note to investors that the bank’s total risk to France and French lenders is less than $2 billion when collateral and hedges are included.

As of June 30, Morgan Stanley had about $5 billion of funded exposure to Greece, Ireland, Italy, Portugal and Spain, which was reduced to about $2 billion when offsetting hedges were accounted for, according to a regulatory filing. The company also had about $2 billion in overnight deposits in banks in those countries and about $1.5 billion of unfunded loans to companies in those countries, the filing shows.

“Their spreads just are galloping wider,” Smith said. “Is it rational that Morgan Stanley CDS spreads would be wider than French bank CDS spreads if the concern is exposure to French banks? I don’t think that makes perfect sense.”
Bond Yield Climbs

Goldman Sachs, which like Morgan Stanley converted from a securities firm to a bank in 2008, had $38.5 billion of gross cross-border exposure to French banks as of June 30, according to a regulatory filing. The firm’s five-year credit-default swaps are trading at 308 basis points, according to CMA.

Morgan Stanley’s 10-year debt has also shown signs that investors are growing concerned. The yield on the company’s $1.5 billion of 5.5 percent senior unsecured notes that comes due in July 2021 has climbed to 6.3 percent from 5.46 percent on Sept. 15, according to prices reported by Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

That’s still lower than the 6.91 percent yield on 4.125 percent bonds issued by Intesa Sanpaolo that come due more than a year earlier, in April 2020, according to Bloomberg data.

Morgan Stanley’s reliance on the debt markets, instead of depositors, to provide funding for its assets may be one cause of concern, some analysts said. Morgan Stanley and Goldman Sachs, which were the second-biggest and biggest U.S. securities firms before converting to banks, both got less than 10 percent of their funding from depositors as of June 30, according to company filings with the SEC.

By contrast, Bank of America and JPMorgan Chase & Co. (JPM), the two largest U.S. banks by assets, funded more than half of their balance sheets with retail deposits at the end of June, filings show.

“The market is just very sensitive to anybody considered to be wholesale funded,” John Guarnera, a financial analyst at Societe Generale in New York, said in a Sept. 23 telephone interview. “If you’re a bank, you can fall back on the fact that you have a strong retail deposit base. Morgan Stanley has deposits, but not like you’d see out of a BofA or a JPMorgan.”

[TSRAYS]

bought some PUTS this morning myself. markets are only temporary IMO

[RonnieD]

traded some calls on the bump, currently
no position, but this all comes down to who
you trust.. can you trust recent company statements
that they not only have small exposure but are also
adequately hedged ?
i think the larger issue, short term bumps or dives
aside (based on Europe news) is the upcoming quarter
which expected to be very weak for both Goldman
and MS. -- and the likelihood of a stale environment
for all of 2012. I just think the upside is sub-20
for quite some time.

[MWM]

Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?

Submitted by Tyler Durden on 09/24/2011 06:23 -0400

The latest quarterly report from the Office Of the Currency Comptroller http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq211.pdf

is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.



At this point the economist PhD readers will scream: "this is total BS - after all you have bilateral netting which eliminates net bank exposure almost entirely." True: that is precisely what the OCC will say too. As the chart below shows, according to the chief regulator of the derivative space in Q2 netting benefits amounted to an almost record 90.8% of gross exposure, so while seemingly massive, those XXX trillion numbers are really quite, quite small... Right?



..Wrong. The problem with bilateral netting is that it is based on one massively flawed assumption, namely that in an orderly collapse all derivative contracts will be honored by the issuing bank (in this case the company that has sold the protection, and which the buyer of protection hopes will offset the protection it in turn has sold). The best example of how the flaw behind bilateral netting almost destroyed the system is AIG: the insurance company was hours away from making trillions of derivative contracts worthless if it were to implode, leaving all those who had bought protection from the firm worthless, a contingency only Goldman hedged by buying protection on AIG. And while the argument can further be extended that in bankruptcy a perfectly netted bankrupt entity would make someone else whole on claims they have written, this is not true, as the bankrupt estate will pursue 100 cent recovery on its claims even under Chapter 11, while claims the estate had written end up as General Unsecured Claims which as Lehman has demonstrated will collect 20 cents on the dollar if they are lucky.

The point of this detour being that if any of these four banks fails, the repercussions would be disastrous. And no, Frank Dodd's bank "resolution" provision would do absolutely nothing to prevent an epic systemic collapse.

...

Lastly, and tangentially on a topic that recently has gotten much prominent attention in the media, we present the exposure by product for the biggest commercial banks. Of particular note is that while virtually every single bank has a preponderance of its derivative exposure in the form of plain vanilla IR swaps (on average accounting for more than 80% of total), Morgan Stanley, and specifically its Utah-based commercial bank Morgan Stanley Bank NA, has almost exclusively all of its exposure tied in with the far riskier FX contracts, or 98.3% of the total $1.793 trillion. For a bank with no deposit buffer, and which has massive exposure to European banks regardless of how hard management and various other banks scramble to defend Morgan Stanley, the fact that it has such an abnormal amount of exposure (but, but, it is "bilaterally netted" we can just hear Dick Bove screaming on Monday) to the ridiculously volatile FX space should perhaps raise some further eyebrows...

[RonnieD]

quite hopefully the bottom was in today.

[gmoney123]

What do you ppl think this will bottom out at... Im looking to buy in soon

[Hostile Takeover]

Thanks to MS there is a little light today.

[gmoney123]

Whens a good time to get in here for long term this has done nothing but drop in 3 years

[RonnieD]

trendline intact. they can't have my shares
unless this line breaks, that's the name of
the game.

[MWM]

MS was actually not downgraded but was mentioned as a possible downgrade target...

Morgan Stanley, Goldman Sachs and J.P. Morgan have also been mentioned as possible downgrade targets, so this may not be the end of the dropping shoes.

Bank of America, Wells Fargo: The Downgrade Shoe Finally Drops.
September 21, 2011, 12:31 PM ET.
By Mark Gongloff

APFor a long, long time now, investors have been waiting for the day when credit-rating agencies cut their ratings on the big banks due to the possibility that they might get less support from the US government. That day has come.

Moody’s has downgraded Bank of America’s long-term credit rating two notches to “Baa1? from “A2? and its short-term rating to P-2 from P-1.

Baa1 is equivalent to BBB in other rating scales, which is just about the average credit rating for corporate bonds.

And this is not an unexpected development. Still, it’s not welcome and could lead to higher borrowing costs. Bank of America stock is down about 3% at last check to $6.69. Update: It’s now down 4.5% at $6.58.

This could have other Too Big to Fail Banks looking over their shoulders, too. They’ve also been warned in the past of the potential for a downgrade. The XLF is down 2%.

It could have been worse for Bank of America. The agencies warned more than a year ago that Bank of America enjoyed 3 to 5 notches of extra credit-rating support based on the implied government safety net. S&P later gave some of the banks a little more standalone credit.

The fact that Moody’s only cut BofA by two notches suggests they’re still getting some support from Uncle Sam. It also means the other bank downgrades, if and when they come, could be even gentler than this one.

Update: Not shockingly, Bank of America disagrees with the downgrade:

Moody’s decision to downgrade our credit rating is based on factors external to Bank of America: Their conclusion that the Dodd-Frank legislation will make the U.S. government less likely to support financial institutions in a crisis, and a possible further deterioration of the economy. In fact, Moody’s explicitly stated that the downgrades do not reflect a weakening of the intrinsic credit quality of Bank of America.

In terms of factors within the control of Bank of America, Moody’s states clearly that we have made significant progress in improving our capital and liquidity positions, shedding legacy and noncore assets, and managing risk. With regard to the mortgage business, Moody’s concludes that we have ample resources to absorb the additional losses we are likely to experience on these exposures.

While we disagree with their conclusions and we believe our ratings should be higher, to minimize any potential impact of this decision on our business, we have been managing our liquidity carefully and we have prefunded our planned borrowing needs for the year.

Update 2: Sure enough, Wells Fargo has been downgraded, too, by one notch to A2 from A1. That’s the equivalent of an A rating by S&P, so it’s still a pretty high rating. Wells stock is down less than 1%.

Update 3: Citigroup’s long-term rating has been upheld at A1. Citigroup’s short-term rating has been cut to P-2 from P-1. Citi shares are little changed. Remember when Citi was the sick man of the TBTF set?

Update 4: Citi responds, too:

Although we are pleased that Moody’s affirmed both the long-term and short-term ratings of Citibank, N.A. and the long-term rating of Citigroup, we completely disagree with Moody’s change to Citigroup’s short-term rating. It does not accurately reflect the significant progress Citi has made since Moody’s last rated Citi more than two-and-a-half years ago. Regardless, we believe that less than 1% of Citi’s funding will be affected by the Moody’s decision and the downgrade will not affect the short-term and long-term funding of our bank vehicles.

At the end of the second quarter, Citi had $462 billion in cash and available for sale securities, representing approximately 25% of our balance sheet. We have ample liquidity based on a variety of stress tests and liquidity models, including the Basel III Liquidity Coverage Ratio, which we are already in compliance with, even though those requirements are not scheduled to come into effect until 2015.

With a Tier 1 Common ratio of 11.6% and a Tier 1 Capital ratio of 13.6% as of the end of the second quarter, Citi is one of the best capitalized financial institutions in the world. We have made enormous progress refocusing our business strategy to take advantage of our global network and reducing Citi Holdings assets by more than $500 billion from peak levels. With a strong capital base, robust structural liquidity and ample reserves, Citi is well-positioned for sustained future earnings.

Morgan Stanley, Goldman Sachs and J.P. Morgan have also been mentioned as possible downgrade targets, so this may not be the end of the dropping shoes.

[MWM]

I thought that is what they said on CNBC but I think your right, MS was just put on watch for a possible downgrade, my mistake...

[10nisman]

And they downgraded MS just now too, not a bad call this monring on my part... Maybe some new the downgrade was coming...

MS was downgraded by Moody's? Have a link? I only see BAC, WFC and C.

[MWM]

And they downgraded MS just now too, not a bad call this monring on my part...

Maybe some new the downgrade was coming...

[10nisman]

Well clearly you are much more advanced than me, why don't you share some great tips since you are so far ahead of the game...

You said you knew and to trust you so I just wanted to give you the heads up when the downtrend started. BTW, financials are selling off today on Moody's downgrade of BAC.

[MWM]

MS just got downgraded...

[MWM]

Well clearly you are much more advanced than me, why don't you share some great tips since you are so far ahead of the game...

[RonnieD]

didn't even know you posted here

bottom trendline held
machines buying hard.

leadership confrontation overblown.