Morgan Stanley's Subprime Submergence (over $9 billion in write-downs, "turning to China" for help)

[Amerigo Vespucci]

Morgan Stanley's Subprime Submergence
Evelyn M. Rusli, 12.19.07, 10:30 AM ET

Everyone expected Morgan Stanley to take a hit. But few expected the troubled investment firm to announce more than $9 billion in write-downs for its fourth quarter. On Wednesday, the company said it lost 3.6 billion, or $3.61 a share, versus a profit of $2.0 billion, or $1.87 a share, a year earlier. It also announced it was turning to China to help shore up its balance sheet.

Analysts, who do not have a particularly good record of forecasting results in their own industry, were hoping for a far smaller loss of 39 cents a share. Nevertheless, shares of Morgan Stanley (nyse: MS - news - people ) edged up 1.6%, or 75 cents, to $48.82 in early trading, as investors hoped that the worst was over.

The rapidly depreciating value of mortgage-related assets and the general turmoil in the credit markets has punished Morgan Stanley and most of the rest of Wall Street. On Wednesday, the firm said it took $5.7 billion in write-downs in November. This loss is on top of the $3.7 billion already announced, putting the total for fourth quarter write-downs at $9.4 billion. The new batch of write-downs will be in addition to the $940 million announced in the third quarter. (See: “ Morgan Stanley Can’t Keep Up” )

On Nov. 7, Morgan Stanley warned investors that the brokerage had suffered steep losses in October, but the firm didn't predict that its write-down would more than double by the end of the quarter. In November, the firm said its net exposure to the mortgage crisis was $6.0 billion. Between October and the end of November, the credit markets continued to sour, as others on Wall Street, like Merrill Lynch (nyse: MER - news - people ), UBS (nyse: UBS - news - people ), and Citigroup (nyse: C - news - people ), announced multi-billion dollar losses. (See: "Morgan Stanley: It Could've Been Worse." )

http://www.forbes.com/markets/2007/12/19/morgan-stanley-subprime-markets-equity-cx_er_1219markets09.html

[Brother_1969]

1. Privatize Social Security Anyone?

With investments and brokerages going under right and left, I sure am glad that I'm not depending on Wall St for my retirement!

Thank you for not investing in the stock market SSA!!!