The Morgan Stanley story after Lehman

Lost track of all the different bailout packages in the US? Check out the article by Kelly McParland of National Post. I was exhausted by the end of it and my calculator had blown up. We have our own massive government nationalisations and obligations running up in the UK, and I hope someone is keeping tabs over here. That way my grandchildren will have a better understanding of why they are still paying off the debts from this government.

The Wall Street Journal has published a really interesting recap on events revolving around the Morgan Stanley share price in the days following the Lehman default. You really need to read this and form your own view. Failing a smoking gun memo or taped telephone conversation, it’s surely impossible to divine peoples’ true intentions in trading. Were firms acting to hedge themselves and reduce risk which is proper and prudent and should be demanded by shareholders or was there manipulation involved? Did some hedge funds pull their prime brokerage business from MS in order to stoke the fires of their speculative short positions in MS or because they were concerned about having their assets tied up in another dealer in the event that MS did fail?

Credit Default Swaps play a big part in the MS story and there has been a huge amount of controversy surrounding the CDS market over the past year. Read this article  by Alex Trias and you can see in a little more detail how it all links together.

Another person mentioned in the MS article is Jim Chanos, head of Kynikos Associates.  I’m not going into his comments in the MS saga, but rather I have attached a really interesting Download GRANTS-Jim_Chanos_10_2008_Presentation_FINAL he gave just over a month ago which is a review of short ideas that he has credited to the Grant Interest Rate Observer.