Don’t Ever Sneak Up On Morgan Stanley Like That Again

Posted by Bess Levin, Oct 10, 2007, 3:52pm

Morgan Stanley’s quantitative strategies group, which lost $480 million during the quarter ended August 31, disclosed in a regulatory filing today that out of its 14 losing days, on its best one, $390 million was misplaced. The securities firm said that it was “caught off guard” by “widespread” investor selling, which their models had not been designed to account for.

Morgan Stanley Traders Lost $390 Million in One Day in August [Bloomberg]

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Posted in: Morgan Stanley, Quantocide, Quants

Comments

Posted by Forehead Slapper, Oct 10, 2007 4:14PM

More 26 year olds or were MIT educated employees involved?

Posted by Anal_yst, Oct 10, 2007 5:28PM

I'd venture to guess those might not be totally mutually exclusive groups, but probably more like 29 year old MIT phD's, etc. That whole schpiel about Simons (as a proxy for quants) 'only hiring people who don't know where wall street is', is really funny. When things like august happen, things that are of little/no surprise to anyone whose face isn't buried in some stochastic calculus or signal processing algorithm, these guys are caught with their pants down coming up with profound explanations like "things our models didn't predict all happened, all at once!" They might have a 190 iq, but if you've never been in the market, no amount of genius points is gonna save your a$$

Posted by abe, Oct 10, 2007 7:59PM

Was Mark Leeds involved?

Posted by jimmichoo, Oct 10, 2007 10:16PM

i wonder what their models account for, only for upsides??! shiiat

Posted by GSBSD, Oct 11, 2007 6:43AM

What about those ten of billions that the quant trading group made for MS over the past 5 years? Those were fake money I suppose, judging from all the people here so eager to dance on the quants' much celebrated demise. For many years while many of you low-life MBAs toiled away your empty lives learning the Alt-Fs of MS Excel and Powerpoint, quant models were printing money faster than the Federal Reserve Bank. $500 MM loss? So what if it's $1 Billion? It's the cost of doing business, the necessary flip side of the risk that you take in model trading. Can't stomach the risk? Get out of the way and go join the army of MBA ass lickers at investment banking. Why focus on the quants? Guess the $50 billions of losses (and counting) that i-bankers cost their firms on LBO loans don't count, right? What's good are i-bankers to Henry Kravis if they couldn't back deals with loan commitment? Nothing much more than overpaid ass kissers I'm afraid, and I bet Henry already has way too many of those under his direct payroll.

Posted by Wei Po Yang, Oct 11, 2007 9:44AM

Do they give a Nobel Prize for Alchemy?

Posted by mr pink, Oct 11, 2007 2:21PM

Should have a nobel prize for creative ways of capital destruction.

Posted by Lumbergh, Oct 11, 2007 5:34PM

Just shows what happens when hyper-educated half-wits dabble in the real world. You can't predict everything with a model, quant monkeys!

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