Clownishness, much like beauty, stands in the eye of the beholder. So let's gather together to behold a clownish trade. Granted: playing Monday morning quarterback to lame stock trades is a bit selective, even venal. But in the end, you learn from analyzing mistakes. Plus, what's more fun than making fun of missteps and pratfalls? With all that said, welcome to the next installment of The Clownish Trade of the Day …
On Tuesday, Morgan Stanley (MS) traders bought the stock like public outrage was going out of style. The thinking -- which is a kind word for it -- was that the company had put its sordid involvement in the Facebook (FB) initial public offering to bed.
As if.
Here's the deal, though, and it can't be forgotten: in this age of instant communication, when the passing thoughts of the famous and obscure are publishable, Wall Street firms cannot maintain their ancient, tribal pinstriped wall of silence.
Wall Street's idea that the public will never breach the castle wall and can simply be ignored until their concerns fizzle out is no longer valid. Above it all is no longer the proper professional identity.
The ease of communication has increased the level of public expectations that a company like Morgan Stanley-or Citigroup (C) or Bank of America (BAC) or Goldman Sachs (GS), for that matter-would have to answer publicly for an offering that goes poof! in the night. Or a rogue trade, for that matter. Paging JP Morgan! (JPM) Moreover, TARP gave the public the well-found sense that in exchange for billions, they are, at the very least, owed an explanation.
Yet Tuesday came, the stock recovered, but Morgan Stanley's lips were still in a state of rigor mortis. They still hadn't even attempted to marshal a defense, which means, considering, that any recovery in the stock price would prove fleeting. Sure enough, the stock was clipped on Wednesday. Then: a word. Attempting to save his bacon, Chief Executive Officer James Gorman deigned to talk to Morgan Stanley employees, his subordinates. That still wasn't sufficient -- and today he'll finally appear on CNBC.
This is not the end of Morgan Stanley's troubles. But it is the first necessary step toward the end. And remember for next time: when a Wall Street firm gets itself into a fine mess, they can't expect the mess to even think about going away until the firm breaks that old pinstriped wall of silence and gives a full accounting to the public.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
