Tags: earnings, graphs, Morgan Stanley, Ruth Porat
So Morgan Stanley announced earnings today and people are sad because FICC trading wasn’t so hot. Asset management and wealth management are okay though? Anyway here’s a guy:
“The fixed-income rebuild hasn’t worked as well as they had hoped,” David Trone, an analyst with JMP Securities LLC in New York, said in a Bloomberg Radio interview. “They want to be more of an asset-gathering institution that also does investment banking and a little bit of trading. They’re not yet really to the point where they’ve convinced all of us what they are yet.”
One way to think about Morgan Stanley is that it’s a big room full of people who invest (or, trade with) other people’s money.1 That money finds its way into Morgan Stanley’s hands in different ways, and those ways change (slowly) over time. Some of it comes from individual investors whose wealth Morgan Stanley Global Wealth Management manages, globally. Some of it is from mutual funds and institutional assets managed by Morgan Stanley Asset Management. Some of it is from shareholders. Some of it is bank deposits. Quite a bit of it is repo and whatnot.
Here’s the mix of where it comes from over the past few years:2
This is pretty unscientific, and Morgan Stanley’s ability and desire to do stuff with its repo funding differs from its ability and desire to do stuff with non-fee-earning client cash. Still you can see some trends there I guess? Read more »
Tags: junior mistmakers, Morgan Stanley, you can scare the bejesus out of a 22-year-old
For the last number of years, private equity firms and hedge funds slowly moved up the time at which they recruit that gotta-have-it talent, junior banking analysts, until it got to the point that they were making offers of employment to people who had graduated college and started working on Wall Street but months earlier, and still had a year and half of servitude left at their respective banks. While employers were used to having second years check out vis-à-vis doing any kind of productive work a couple months before moving on, they finally decided enough was enough. Feet were put down, expectations (that people would stop interviewing shortly after their first day on the job) communicated.
Knowing it’s one thing to smile, nod, and then tell Apollo HR that you look forward to seeing them on Monday and another to put your name on a contract promising you’ll do no such thing or risk getting canned, Morgan Stanley sought to get a little extra assurance its worker-bees would fall in line, requiring them last summer to put it in writing or beat it.
And while the fear of god was successfully put into some, the craftier ones were having none of it. Read more »
Tags: clawbacks, extensive background checks, Form U-5, Goldman Sachs, Matthew Taylor, Morgan Stanley, oopsies
One might think that being terminated by Goldman Sachs for taking “inappropriately large proprietary futures positions in a firm trading account” and “violating investment-related statutes, regulations, rules or industry standards of conduct” might make it hard to get another job on Wall Street.
Not at all. It might make it hard, however, to get your deferred compensation after you plead guilty to fraud, re: said inappropriately large futures position. Read more »
Tags: Basel III, Commercial Paper, financial innovation, JPMorgan, liquidity coverage ratio, Morgan Stanley, muni bonds, Sunshine State Governmental Financing Commission
Financial innovation gets kind of a bad rap, and one of my favorite parts of this job is when I get to celebrate it just for being itself. Sometimes this means breathtaking magic like the derivative on its derivatives that Credit Suisse sold to itself, or elegant executions of classic ideas like the Coke shares that SunTrust sold for regulatory purposes but not for tax purposes. Other times it’s a more prosaic combination of already-existing building blocks to allow people who were comfortably doing something to keep comfortably doing it in the face of regulations designed to make it more uncomfortable.
Yesterday a reader pointed me to a Bond Buyer article that, while perhaps neither all that scandalous nor all that beautiful, is sort of cozy. It’s about a new issue of callable commercial paper issued by a Florida municipal financing commission, and here’s the joke:
JPMorgan came up with the new product as a solution for variable-rate municipal issuers facing impending Basel III regulatory problems. The proposed regulations would require banks to have a certain higher value of highly liquid assets to be available to turn into cash to meet liquidity commitments that could be drawn within 30 days. Maintaining higher liquidity would be expensive for banks, which may try to pass on costs to its issuers, according to an analyst at Moody’s Investors Service. “What we did, starting over a year ago, is ask what we can do to change the product that will still work for all the players, including issuers, investors, and the rating agencies,” Lansing said. “And the ultimate result was this product.” The new product allows banks to continue to support variable-rate products after the regulations are implemented. The paper has a variable length of maturity, but always at least 30 days. Several days before the paper would have 30 days left to its maturity, the issuer calls the paper.
The joke isn’t that funny, though I giggled at the phrase “a solution for variable-rate municipal issuers facing impending Basel III regulatory problems.” Municipal issuers face no Basel III problems: municipalities are not subject to Basel III. Read more »
Tags: bonuses, James Gorman, Morgan Stanley, silver linings
The bad news: James Gorman’s pay fell 30 percent this year. The good news: he’s now in a position to show employees how to take these setbacks like a man, rather than grumbling like someone who puts their compensation in a one-year context to define their overall level of happiness. Read more »
Tags: cdos, Morgan Stanley, RMBS, shitbags
One thing that would probably be fun would be reading the internal emails sent around at the places that bought terrible RMBS CDOs in the end times of 2006-2007. What did they say? Was it “these mortgages are worth twice what Morgan Stanley is selling them for! We are ripping their faces off”?1 Was it “I looked through a representative sample of the mortgages underlying the collateral in this deal and I think the yield more than justifies the risks”? Was it “my asset-level diligence was light because my macro view is that house prices will go up a lot in the next 18-24 months”? Was it “we have to invest $100mm somewhere and this gets 2bps more yield than other AAA-rated options”? Was it “I don’t know that much about mortgages but I sure am glad we can trust our friends at Morgan Stanley to put us in such a high quality product as this here CDO”? The possibilities are endless and, I think, fascinating: each trade has two sides, and each side has a view, even if that view is sometimes more of a vacant stare.
But the arrow of lawsuits runs only one way so instead we get this:
On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members’ suggestions: “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust,” “Mike Tyson’s Punchout,” and the simple-yet-direct: “Shitbag.”
The shitbag email chain is part of a collection of internal documents produced in China Development Industrial Bank’s lawsuit against Morgan Stanley over this “Stack 2006-1″ CDO deal that Jesse Eisinger describes today in DealBook and ProPublica. Morgan Stanley has issued the standard “these emails were just a joke and have nothing to do with anything” statement,2 and while normally that is just a meaningless lie that you say after your employees are caught sending around emails saying “this deal is shit, no, I mean it, this deal is composed of actual feces, I am not kidding, come look” – the emails here aren’t that bad. Basically they were like “ugh we gotta name this deal before we print it” and everyone was all “what about Macalester Albermarle Roundtree Paddington Pemberley Structured Finance Limited” and one dope replied with some gallows-humor names. In March 2007. When it was A SUPER DUPER SECRET that subprime mortgages were in trouble:3 Read more »
Tags: James Gorman, layoffs or lack thereof, Morgan Stanley, that's nice
Great news for anyone who’s been sitting nervously at their desk at Morgan Stanley the last few days, wondering whether or not their boss was about to tap them on the shoulder to go have a chat with HR: if you’ve made it this long, you’re safe! There will be no more human layoffs for the foreseeable future (plants may still be at risk). Read more »