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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in Japanese... More
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  • Tough Times at Morgan Stanley 0 comments
    Apr 23, 2009 2:24 PM | about stocks: MS, GS

    I have to confess that when my alma mater, Morgan Stanley (NYSE:MS), announces earnings, it still tugs at the heart strings. We endlessly outperformed expectations, but laughed because we knew there were tons of latent profits sitting on the back books. The stock would rocket to trade at a luxurious five times book. We were the invincible Masters of the Universe. Things have changed a little bit since the eighties. Today the company said it lost $190 million in Q1, and that revenues plunged from $7.92 billion to $3.04 billion. The dividend was cut 82% to a paltry five cents a share, and the stock backed off  9%. Those coupon clipping retired Morgan MD’s have got to be pissed. I have to confess that “risk adjusted returns” is a term that is new to me when applied to corporate earnings. The venerable white shoe company disclosed so many special onetime only provisions it almost earned a place in the Guinness Book of Records. Bizarrely, it lost money on marks because its own debt is now trading higher than three months ago, wiping out unrealized gains on the theoretical short. Mark to market can be a bitch. Guess what? Lower risk taking means fewer profits. Thank goodness I’m not there anymore, now that the salad days are a distant memory. CEO John Mack should have stayed at hedge fund Pequot Capital, where he would no doubt now be reaping an astronomical bonus. But those of us who know John will tell you it was never about the money with him. He had to be the biggest, baddest boy on the block, the Master of the Masters of the Universe. If you had to name two firms that are going to survive this mess they are MS and Goldman Sachs (NYSE:GS). They are, after all, still the smartest people in the room. Do I need to point out that the stock is up 430% from the October low?
     

    Stocks: MS, GS
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