In Stanley We Trust
There's a new sheriff in town boys. As much as I like to rant and rave, sometimes the words of others say it better than I ever could myself:
Morgan Stanley is the new Goldman Sachs. Every one of their divisions shows an improvement and the improvement in trading operations is especially impressive.
Those are certainly big words to throw around, but judging by what we've seen transpire over the past months...they are also tough to dispute.
With other global banking giants slashing jobs by the thousands and others struggling to turn a profit Morgan's marauding run through the heart of a stagnant market defense is raising eyebrows and filling up the box score.
Morgan Stanley's revenues from its equity business climbed to $1.9bn (£1.2bn) in the quarter from $1.4bn a year ago, while bond and commodity revenues hit $2.09bn. Together they helped drive the bank's revenues to $9.28bn, up from $7.96bn a year ago, their highest level since before the financial crisis.
Anyone smell a MSHSBC monstrosity on the horizon? I doubt Morgan's likely to commit the over-diversification sin again, but anything's possible. Who would have thought that the BB many considered the least agile and flexible around the time of the crisis would rebound to dominate in such a relatively short time span.
I mentioned yesterday that the government had something to do with this power transfer. Whether by hook-or-by-crook markets need a dominant Wall Street force to rule the roost and Washington needs this force to be a friendly one. Goldman had made so many enemies and attracted so much negative press with its holier than thou approach that a dose of reckoning had to come. I don't think the SEC has WSO bookmarked, but our own eternal laughter at how Goldman ran circles around Congress is indicative of the greater public opinion. The time came for Goldman to suffer and the precarious language (and logic) of Dodd-Frank does indeed seem to go after Goldman's top revenue generators as much as after shady industry practices overall.
Though a recipient of the same $10 billion corporate welfare check as Goldman, Morgan Stanley has never had to face the Congressional interrogation chamber with the fervor of Lloyd and Co. In fact, we have hardly heard a whistle over Morgan Stanley. Names like John Mack and James Gorman have nearly gone omitted from the folk lexicon of the Great Recession. It is as if Morgan had absolutely nothing to do with the crisis.
Stanley caught my attention with the LinkedIn IPO which they absolutely smashed out of the ballpark. Though I am kidding about MSHSBC, it is highly likely that whenever the next great M&A wave comes it will be MS leading the line. Let me remind the doomsdayers that the last great such run came on the heels of America's last great biggest crisis since the Depression.
Though there are differences between early 80's Staglfationerica and today, there are also more than a few similarities. I won't get into the overall economy, but I will say that Morgan Stanley seems to clearly be the BB likely to lead Wall Street out of its current malaise... whenever that might be.
All heil the king, the king is dead...
Morgan Stanley seems to be gaining more attention as the CEO is even coughing up money to invest in the firm's stocks... apparently "undervalued". Something to keep watch of?
http://dealbook.nytimes.com/2011/08/04/morgan-stanley-c-e-o-buys-2-mill…
didnt they lose $588 million this past quarter? why are they the shit now?
Aren't they owned by a Japanese car company?
LOL
I was quite confused by the fact that everyone hailed them as the best thing since GS when they lost money as well, so I dug in to get the real story. Apparently the "loss" was due to them paying back most of the investment that Mitsubishi made in them during the crisis. That will save them $800 million a year in interest payments, which is a good thing. I still don't get why its perceived that they are beating GS up though, from what I read, GS is taking on less risk, leading to less profit, while MS is just kind of chugging along, and dealing with the choppy economy well, but not exactly killing it.
I guess "not exactly killing it" is the new killing it in 2011.
Oh, God. How bad did the MS board cringe when they got an endorsement from Dick Bove?
I love how everyone is getting ahead of themselves here because Morgan Stanely had 1 year that's better than Goldman.. woohoo! How many years has Goldman trumped Morgan Stanley? GS had a bad year, like everyone else does. They will be back.
But thats how it starts bud. Its first 1 year and then 2 year and then it hits you, " Maybe something is structurally happening with GS."
Goldman Sachs used to be run by bankers, but under Blankfien, a former trader may I remind you, they became less of an investment bank and more a trading shop. Everyone at the time said, "Hey, as long as were making money, that is all that matters."
But the truth is, Banking is about building trust and relationships with the client. Thats how you make money!!! When Goldman became a gigantic trading shop, clients became less like clients and more like counter parties for the other end of the trade. Goldman has a gigantic PR problem with Blankfien at the center of it all. He needs to go. As long as Blankfien is CEO, GS is still living in pre 2008 world and their demise is near on the horizon.
Totally agree with this. Would have given you a SB if I had one.
This is definitely interesting because the past couple of years, the prevailing opinion seemed to be that JP Morgan and Barclays were the new sheriff and deputy in town. Their leadership at the top was certainly better than Goldman's or Morgan Stanley's. We don't want to count them out either.
JP Morgan has played it the best out of any bank IMHO. GS and MS have more "prestige" because of their lack fo a commercial/residential banking arm. But I imagine outside of the crisis, a huge bank like JP Morgan with Bear and WaMu is gonna run train on the other banks. I feel Citi has perennially mismanaged, and BoA is not ready. (just saying those because they are the most readily compare). It takes a while to dig yourself outta a hole as big as Citi or BAC has dug. But JPM seems poised to do great as Wall Street recovers-especially if they can grab up some of the good fired people from the other banks.
How can MS be the best when their trading arm is soooooo bad?
I'm sure you know this, but not every part of a bank can be profitable. Sometimes it can be just one division carrying the whole thing. I forget exactly, but last year (or 2009?) didn't JPM's Investment Banking and Structured Credit arms post huge margins when Card Services and commercial banking were in the dumps?
But yes, agreed that JPM will be rolling in it if they get some of those new hires and the economy recovers (for real this time).
Lol...Dick Bove endorsed MS? I'm gonna go buy all the MS out there. I mean...when have his predictions been wrong?
GS is always better than MS.
In the current market and regulatory environment: the client is king and traders aren't.
MS is beating GS at the moment because their core value has always been to put the client first - even if it comes at the expense of the firm. The same definately cannot be said of GS, unfortunately, despite it also being listed on their rather longer core values statement. If you read their recent promotional material though you can see they are now trying to play the "clients first" card. Due to their reputation, it will take people some time to believe that a firm who says "buy this" whilst selling it themselves really does put client interests first.
As to whether MS is the new top dog, they lost a lot of their talented people this year through a very poor comp day. GS on the other hand did it's usual fire the bottom 5-10% (though also lost quite a few to funds). Are either of these really best positioned for an upturn in the market?
MS will likely do well, but so will the other banks. I don't think many people realize (even inside the industry) that GS is almost operating in an entirely post-regulation manner already. The bank as a whole is levered 2 to 3 times less than its rivals and holds T1/T2 capital levels 3-4% higher than what's going to be required. Several of the other banks haven't even really concerned these requirements yet, or if they have, they haven't acted to move toward them. No bank should really complain if they're able to pull in 30+ billion in annual revenues with the greater economic environment isn't ideal.
It was just one quarter...
But...let's be honest. The investment banks make like no money from banking. Its all trading.
Nobody cares about ancient history.
More relevant are the peer-reviews that GS does on its employees. Remember Tourre (that french guy) and some other MDs testifying before the Senate last year? The peer-reviews were part of the evidence. They clearly show that GS spent quote "countless hours" trying to persuade clients to stick with it's ill-fated GSAMPs (GS alternative mortgage products) while GS traders continued to short the market in the meantime. Nobody really trusts GS anymore- the only reason they are still on top is that they still have huge flow in some critical market spaces- but that's not a permanent saving grace.
Back then (late 80s) their major business was based on client relationships from traditional banking. Ever since it became a 99% trading company, those relationships matter less than market flow. Screw a company on a corp finance transaction and other companies will go to MS. Screw a company or HF on some specific interest rate swaps where you have 70% of the market share and they may still have to (grudgingly) come back. But I don't think that means they can afford to be the scourge of the earth and still be on top long-term.
Gimme a break. I am a trader as well and my mentality is to make money while helping our salespeople's clients achieve their risk/investment/whatever objectives. I've made good money being a plain old market maker.
GS is not a prop shop (if it has ever been...). Clients are counterparties and there's an inevitable misalignment of interests. But as I'm sure you're a good trader, you know that your job is not to take directional risk and fuck over the poor clients who were stupid enough to take the other side of your trades, don't you?
As for CEOs of Goldman being bankers, I suggest you get your facts rights. GS has had TWO CEOs so far, Paulson and Blankfein. So 50% of them were traders. Before Paulson (and the IPO), Corzine headed the firm. A bond trader. You read that well! Before that Friedman shared the position with Rubin, a trader, too. GS has been a trading powerhouse since Gus Levy in the 70s.
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