Is Morgan Stanley About to Fail?

When I was in college, Morgan Stanley was the place all of the soon-to-be Ibankers wanted to be. It was the blue chip, along with Goldman, of the NY Investment banking world. A company that once controlled markets is now at the market's mercy.

Here is Morgan Stanley's 52 week stock chart:


This is what happens when massive leverage goes in the wrong direction.  It is like a freight train barreling out of control down the tracks. Marketwatch is reporting that creditors are already running from Morgan.

Marketwatch reports:

"Shares are now down 77% to a 10-year low. The bank is under pressure from counterparties many of whom are calling in their loans. Financing has dried up."

Bloomberg has the following quote:

"The analogy is a snowball rolling down a mountain; the mass needed to stop that negative momentum increases as that snowball picks up speed and size,'' Egan-Jones's Sean Egan said in a phone interview today. ``Perception trumps reality. They need a massive injection to stop the slide and hopefully they don't commit the Bear Stearns or Lehman mistake.''

Morgan Stanley is supposed to be receiving $9 billion in capital on Tuesday from Japan's Mitsubishi UFJ Financial Group Inc. in exchange for 20% of the company.  Many are now wondering if Morgan Stanley will make it to Tuesday and whether the $9 billion will be enough.

Let's hope it does.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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