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Despite Raising VaR To Record, Morgan Stanley Revenues Are A Bloodbath

Submitted by Tyler Durden on 10/20/2010 10:27 -0400

A few months ago, before it became a staple MSM topic, we speculated that the dereliction of capital markets by both equity and credit traders would mean a complete collapse in Wall Street sales and trading (aka hedge fund proxy) revenues, now that investment banks rarely if ever perform traditional IB activities like advisory and underwriting work. As the latest battery of Q3 bank earnings has confirmed, we were correct, however nowhere more so than as pertain to Morgan Stanley: the bank's Q3 revenues were an abysmal disaster, with total sales and trading revenue collapsing from $3.7 billion in Q2 (and $4.1 billion in Q1, $3.2 billion in Q3 2009) to just $1.8 billion. The drop was especially pronounced in Fixed Income S&T, which plunged from $2.3 billion to $846 million. Yet what is scary is that this plunge did not occur in an environment of moderating risk management: oh no. In fact, the firm's aggregate average trading and non-trading VaR in Q3 2010 was the highest on record, coming at $189 million! Meaning the bank had to stretch and put massive amount of risk on the books to eek out even these pathetic numbers. It also means that one day, as MS and others once again start raising their VaR in pursuit of that elusive last HFT dollar, another market crash will result in billions in trading desk losses in a span of minutes.

Risk is back, but after all why not? Thanks to the Fed, there really is no risk. We actually were surprise VaR for most banks was not a four digit number this quarter.

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Wed, 10/20/2010 - 10:29 | 664043 SheepDog-One

So then MS to da moon, yea?

Im just glad Im out of this mess, theres no risk benefit here with these insane drunken pirates.

Wed, 10/20/2010 - 10:38 | 664075 russki standart

Welcome to Fascism... union of corporate and state, wherein the sheeple are controlled by the minion class aka politicians for the benefit of the international banksters. Real capitalism need not apply.

Wed, 10/20/2010 - 10:32 | 664055 ratava

wfc having a flash orgasm

Wed, 10/20/2010 - 10:32 | 664056 Ripped Chunk

Don't worry about earnings. There will be plenty of bonuses paid anyway.

$144 billion?

Wed, 10/20/2010 - 10:33 | 664059 sweet ebony diamond

I am more interested in the compensation numbers.

As in the cash & benefits going out the door in compensation for utterly useless services.

Wed, 10/20/2010 - 10:33 | 664060 TooBearish

Gawd what a bunch of retards - Marke to myth and all and this is best you can do? Weak....

Wed, 10/20/2010 - 10:34 | 664063 Turd Ferguson

"Meaning the bank had to stretch and put massive amount of risk on the books to eek out even these pathetic numbers. It also means that one day, as MS and others once again start raising their VaR in pursuit of that elusive last HFT dollar, another market crash will result in billions in trading desk losses in a span of minutes."

Yes! Carnac himself could not have said it any better!

Wed, 10/20/2010 - 10:39 | 664080 Oh regional Indian

Right on Turd. I came down to say the same thing.

Reading that paragraph felt epiphenous to me, for some reason. Like I "got" something.

Hmmm.....

ORI

http://aadivaahan.wordpress.com

Wed, 10/20/2010 - 10:38 | 664076 firstdivision

Ahhh good old VaR. The easiest measurment to miss read in banking...too bad that VaR actually means you could lose that amount or more due to the deviation. Also VaR is waaaay to easy to fudge to bring the number down.

VaR, the other white lie.

Wed, 10/20/2010 - 10:40 | 664086 plocequ1

Risk is back, but after all why not? Thanks to the Fed, there really is no risk. We actually were surprise VaR for most banks was not a four digit number this quarter.

Well, There it is.

Wed, 10/20/2010 - 10:58 | 664155 MarketTruth

Risk? What risk as the Fed will QE to infinity and devalued dollar means everything will be fine as long as you can hold out for the massive dollar devaluation.

Wed, 10/20/2010 - 11:07 | 664195 treemagnet

I smell takeovers, bullshit M&A, and boatloads of federal lubricant

Wed, 10/20/2010 - 11:09 | 664208 Downtoolong

Two trillion dollars in public money and guarantees allocated to these pathetic investment bankers so they can try to justify more market gambling and record bonuses for themselves. And all of this occurs amid the worst economic depression in 50 years.

So much for efficient capital markets.

Wed, 10/20/2010 - 11:14 | 664227 John McCloy

Less cash to go around. Retard level dangerous leveraging to squeak out these daily devaluing pennies. And another day closer to interest rates going up whenever that may be ending the party. In the interim still appears as though those unicorn assets not only will never recover buy lose more value as this painful process drags out.
Im sure yesterdays news was caught alot of desks by surprise.

Wed, 10/20/2010 - 11:16 | 664236 jesus_quintana

Morgan Stanley makes me sad.

Wed, 10/20/2010 - 11:59 | 664360 hedgie

VaR calculations...yes, those proved so accurate and helpful in 2008. The true VaR at MS is of course a multiple of book value. But the looting can continue as long as the Federal Reserve stands behind them.

Wed, 10/20/2010 - 13:01 | 664545 Bartanist

And we will all shed a silent tear.

Wed, 10/20/2010 - 20:17 | 665672 arthur darrell

you DO realize wfc and watchoveryou wish to remain seperate entities and none of the broker issues will assist wfc in divestiture. afraid that orgasm was just a one timer

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