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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!
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.
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...
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Morgan Stanley
1585 Broadway
New York, NY 10036
Phone: 212-761-4000
Fax: 212-761-0086
Web Site: http://www.morganstanley.com
Index Membership: S&P 100
S&P 500
S&P 1500 Super Comp
Sector: Financial
Industry: Investment Brokerage - National
Full Time Employees: 53,218
BUSINESS SUMMARY
Morgan Stanley, a financial services company, through its subsidiaries and affiliates, provides various products and services to clients and customers, including corporations, governments, financial institutions, and individuals. The company operates in four segments: Institutional Securities, Retail Brokerage, Asset Management, and Discover. Its Institutional Securities business includes capital raising, financial advisory services, including advice on mergers and acquisitions, restructurings, real estate, and project finance; corporate lending; sales, trading, financing and market-making activities in equity securities and related products, and fixed income securities and related products, including foreign exchange and commodities; benchmark indices and risk management analytics; research; and investments. The company’s Retail Brokerage business provides brokerage and investment advisory services covering various investment alternatives; financial and wealth planning services; annuity and insurance products; credit and other lending products; banking and cash management, and credit solutions; retirement services; and trust and fiduciary services. Its Asset Management business offers global asset management products and services in equities, fixed income, and alternative investment products through the company’s representatives; third-party broker-dealers, banks, financial planners, and other intermediaries; and the company’s institutional sales channel. The company’s Discover business offers credit cards and other consumer products and services; operates a merchant and cash access network for credit cards; and an automated teller machine/debit and electronic funds transfer network. The company was founded in 1935 and is headquartered in New York City.
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