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Wednesday, September 17, 2008

Morgan Stanely: We Need Partner, Or Not Going To Make It

"We need a merger partner or we’re not going to make it." -John Mack, CEO of Morgan Stanley

As Fears Grow, Wall St. Titans See Shares Fall: "Even Morgan Stanley and Goldman Sachs, the two last titans left standing on Wall Street, are no longer immune.

To the surprise of executives within those firms, and their rivals, the stocks of these powerful companies were drawn into the crisis of investor confidence on Wednesday. Morgan Stanley, whose stock fell almost 25 percent, was considering a merger with Wachovia or another bank to help shore up its finances. Goldman Sachs’s stock fell almost 14 percent, and it had to rebuff rumors that it was seeking a capital infusion."

I said it in this morning's post Financials: Stay Short: Morgan Stanley Next Domino.

This looks serious and this looks DESPERATE.

"“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit, according to two people briefed on the talks. Mr. Pandit, a former senior investment banker at Morgan Stanley, said Citigroup was not interested. It is thinking of deals it can strike with consumer banks, like buying the struggling Washington Mutual out of bankruptcy if its reported efforts to auction itself should fail, that would provide it with cheaper deposit funding. A Citigroup spokeswoman declined to comment.

Having failed at that, Mr. Mack entered into discussions on Wednesday with Wachovia and several other banks, people briefed on those discussions said. The talks with Wachovia are preliminary and a deal may not emerge. The banks declined to comment."

First of all Citigroup (C) can't afford to acquire anybody. Citigroup is dead. They have the kind of balance sheet that makes you vomit. You see, C is the king of Level 3 assets. How much does C have in Level 3 assets? Just THE MOST.

See Bulltrap: ABCP and Level 3 Bombs to see how much.
See Level 3 Rules to better understand the scam.

Second, the banks might as well wait and collect the same assets for pennies on the dollar AFTER a bankruptcy. Much like Barcley's just did with Lehman...

Honestly, this is what probably happened: C had two options. The first was to insult Morgan Stanley (MS) by saying the don't want to merge. The second was to openly acknowledge they cannot afford to buy them because they are about to die themselves. They took the path of least resistance.

C is the third largest component in the UltraShort ProShares Financials ETF (SKF).

People, especially the talking heads on Bubble Vision (CNBC) keep blaming these mythical short seller ninjas for these disasters...

I have one simple question for all the clowns that blame short sellers: "Isn't that a bit like blaming the flies for the shit?"

Explain to me why the Bulltards can't just absolutely smash the evil shorts in these stocks? Hmmmm? If these companies are so fine, why won't the 'smart money' swoop in and just eat the shorts? Just squeeze them until they squeal like little girls?

You know EXACTLY why. The flies are there because they smell nothing but SHIT.

End of story.


Johnabi said...

It's no wonder you have become one of my "must" reads everyday. I am laughing at the "picture" you have given us. (flies!!) Yet... the truth is there!! Thanks for the work you are doing and your willingness to share. I am one of the "lucky" ones who has to decide when to get out of my profitable shorts. Thanks again.

Hulu said...


You're DA MAN!!!

When I grow up, I want to be just like that Financial Ninja Ben!!!

Thanks for the laugh and tips...who said nothing is free.

Anonymous said...

Needs a partner? Oh I get it. Morgan Stanley wants to participate in the new Olympic sport: "Synchronized Cliff Diving".
Cant wait to see that one.

Anonymous said...

I was reading some of Jim Cramer's articles on the and He has an article titled:
'Were in 1987 mode'.

This article was published at
" 09/17/08 - 01:44 PM EDT. "

Now the punchline...

At the end of the article is this little gem:

"At the time of publication, Cramer was long Morgan Stanley and Goldman Sachs."

Anonymous said...

anyone concerned about counterparty risk on the inverse funds? Been heavily into them but got out today and am sticking with grzzx -cant short in my retirement account so opting for bear fund. Any thoughts would be appreciated

DHalsey said...

Great post. That is scary as hell!

Vijay said...

Daaaamn Ben. The witch hunt is going into overdrive.

This is getting scary.

Perplexo said...

Counterparty risk on inverse funds....hmmmm.
Have all the conservative, actually conservative, bankers all moved to Canada?

cek260 said...

Ben - your analysis is dead on. Have been following your stuff for a while. Great job...

Also, would be interested to hear your thoughts on TLT puts- it's hovering at about 98-100 and there's no doubt LT Treasuries will increase in the coming months (or possibly weeks at this rate).

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