Opening Bell: 12.17.08

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Morgan Stanley Posts Loss (MS)

NEW YORK, December 17, 2008 - Morgan Stanley today reported income from continuing operations for the fiscal year ended November 30, 2008 of $1,807 million, or $1.54 per diluted share, compared with $2,563 million, or $2.37 per diluted share, a year ago. Net revenues were $24.7 billion, 12 percent below last year. Non-interest expenses of $22.5 billion were 9 percent below 2007. The return on average common equity from continuing operations was 5.2 percent, compared with 7.8 percent the prior year.
The loss from continuing operations for the fourth quarter was $2,195 million, or $2.24 per diluted share, compared with a loss of $3,588 million, or $3.61 per diluted share, in the fourth quarter of last year. Net revenues were $1.8 billion, compared with negative $0.4 billion in last year's fourth quarter. Non-interest expenses of $5.2 billion, including non-cash charges of $725 million related to the impairment of goodwill and intangible assets, decreased 3 percent from a year ago.
Net income for the year was $1,707 million or $1.45 per diluted share, compared with $3,209 million, or $2.98 per diluted share, a year ago. The return on average common equity for the year was 4.9 percent, compared with 8.9 percent a year ago. For the quarter, the net loss was $2,295 million, or $2.34 per diluted share, compared with the net loss of $3,588 million, or $3.61 per diluted share, in the fourth quarter of 2007. Net income for fiscal 2007 included the results of Discover Financial Services (Discover), which are reported in discontinued operations. Costs in fiscal 2008 related to a legal settlement between Discover, Visa and MasterCard are also included in discontinued operations.

Ex Morgan Stanley Employee Sentenced (WSJ)
Not a bad little read on the (former) MS employee that was sentenced yesterday for stealing a list of hedge funds and the rates it charges them.
Dollar Falls Against, Well, Everything (BBC)
Adventures in the patently obvious:
"The US interest rate is now the lowest among developed countries."
We're at zero (effectively), which takes a whole new, special kind of talent.
Parisian Models Disrobe In Protests (Reuters)
Parisian models stripped to nothing braving the cold in protest of wages and a ban on artists' tips - called cornet. I'm calling for a world wide stance on this to be taken, all models need to get naked, everywhere. Right now. By God people, your fellow workers are struggling and they need your help: assemble, disrobe, and call me and tell me where.
SEC Issues Statement, Set To Open Investigation (NYT)
The statement is fairly self scathing for a government organization, which seems only appropriate given the magnitude of individual losses.

The commission said it received credible allegations about the scheme at least nine years ago."
[...]
One of the commission's investigative teams that had examined the Madoff firm was headed by a lawyer named Eric Swanson, who served for 10 years as a lawyer at the commission and left in 2006.
[...]
In 2007, Mr. Swanson married Shana Madoff, a niece of Bernard L. Madoff and daughter of his brother, Peter Madoff, the firm's chief compliance officer. Ms. Madoff is the firm's compliance attorney.

And the official statement from the SEC.
Asian Hedge Funds Profit From Prop Desk Death (Reuters)
The article points out that most if not all of the prop desks at the banks have been effectively scaled back to represent our target rate, and that affords Asian Hedge Funds with an opportunity to enter the market and acquire ass loads of potentially profitable distressed debt.
I don't have to tell you, of course, that this breeds a homogenous environment such that when and if failures happen, there will be a multiplier effect -good for you Asia.


You Already Knew This: Citi To Merge Corporate And Investment Banking Units (Reuters)
"The new unit will be overseen by Ned Kelly, head of global banking and alternative investments in the institutional clients group."

--William Richards

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