Monday, March 23, 2020

How Morgan Stanley Called the Exact Moment of The Broker/Dealer's Peak (MS; XBD)

Today in schadenfreude, sometimes they do ring a bell at the top.
From Slope of Hope:

Worst. Timing. Ever.
Remember what happened back on February 20th? Yes, you’re right, the highest prices for equities in the history of the world. But something else, too: it was the day that the geniuses at Morgan Stanley paid a huge premium to purchase what is agreeably one of the lamest online brokers ever, E*Trade:

The extremely high-paid leaders at MS didn’t just pick the wrong year to buy E-Trade. Or the wrong month. Or week. They nailed the top to the millisecond.

It’s absolutely uncanny, and as we look back to the beginnings of this bear market, surely this foolish purchase will be a milestone that people will shake their heads at and ask, “Why didn’t I see what was going to happen next?

Here’s the broker/dealer index ($XBD) with the day of the purchase, as well as the two days flanking that day, inset for detail. The arrow marks the spot when Morgan Stanley thought buying a crappy online brokerage would be a swell idea.
In the four weeks that followed, the broker/dealer index lost 44% of its value. And I strongly suspect that once we bottom out in a year or two, it’ll be vastly lower. The beleaguered shareholders, whose own MS stock fell precisely the same amount in the same time period, sure better hope that their richly-paid leader is worth their massive pile of salt....MORE
He goes on to make a market prediction that is rather sobering but for now we giggle at the folly of others, knowing deep down that our turn will come.
Medieval Europeans were firm believers in the Wheel of Fortune:

E027044 Royal 18 D. ii f. 30v
Detail of a miniature of the Wheel of Fortune with a crowned king at the top, from John Lydgate's Troy Book and Siege of Thebes,
with verses by William Cornish, John Skelton, William Peeris and others, England, c. 1457 (with later additions), 

Royal 18D. ii, f. 30v.-from the British Library Medieval manuscripts blog

Sometimes you're up, sometimes you're down.