Wednesday, September 17, 2008

Financials: Stay Short, Morgan Stanley Next Domino (MS)

MS is down $5.43 (19%)
From The Financial Ninja:
...Now that one finance firm after another is getting whacked, I expect the three largest components of SKF (JPM, BAC and C) to fall significantly over the next few months.

“BAC is going to come up against a confluence of resistance around $34.00 where outright resistance (horizontal red line), the declining trend line (black line) and the declining 200 day EMA will all meet up. With prices now overbought, and up volume still anemic, it is probable that resistance will hold.”

These levels held and violently rejected prices. BAC fell back “into the box” and then dropped through support around $28 before closing above that key level. BAC is run by executives blinded by greed. Countrywide Financial was not a bargain. Merril Lynch (MER) is not a bargain. They are giant, undefined liabilities. To expand like this in a credit crisis is border line retarded. BAC shareholders will eventually realize this…

Heads up. Morgan Stanely (MS) appears to be the next domino targeted for the fall…

Pre-market MS is down 15%...

From Across The Curve:
Morgan Stanley CDS traded most of the day yesterday around 750. Following the earnings announcement they tightened late in the day to about 705. They are currently around 925 basis points.
From CNBC:
Morgan Stanley Considers Finding a Merger Partner

Morgan Stanley officials are weighing whether the firm should remain independent or merge with a bank given the recent turbulence in the company's stock, CNBC has learned.

Morgan Stanley Earnings

As of late yesterday (Tuesday) Morgan officials were not in merger discussions, according to people close to the matter. But senior people at Morgan concede that further zig-zags in the company's stock price [MS 23.00 -5.70 (-19.86%) ] could and possibly will force the company to change course and seek a merger partner, probably a well capitalized bank.

Morgan Stanley CEO John Mack wants to avoid the mistake made by Lehman Brothers CEO Richard Fuld, who brushed aside buyout offers until the market crushed shares of the firm and force it into bankruptcy....