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A Morgan Stanley Clarification
Two days ago, we posted a story titled "Why VaR Is A Joke: Morgan Stanley Admits Losses in April And May Were "Much Higher" Than Anticipated" in which we extracted a segment from a report by Jim Caron to claim that VaR models are broken beyond fixing. Today, Morgan Stanley has asked us to provide a clarification on our post. We gladly comply.
Tyler,
The comments from Jim Caron that you reference in this article concern a model portfolio maintained by Morgan Stanley Research. This fact isn't clearly reflected in the headline or in the article. The headline in particular suggests that the Firm is disclosing losses. This is not the case. Again, Caron's comments concern a model portfolio within Morgan Stanley Research. Please let me know if you can clarify this in an update, and let me know if you have any questions.Thanks,
xxx
Morgan Stanley | Corporate Communications
We hope this clarifies everything.
Furthermore, it was not our intention to imply that Morgan Stanley is disclosing losses. God forbid - with almost every Wall Street firm not having a losing day in the past quarter, just the insinuation that MS may have lost money on just one day would likely result in a bear raid that would wipe the firm out faster than Dick Fuld can say "CDS speculators in the mist." Obviously with the 2s10s at near all time wides (and with MS' PDT allegedly hiring), 1,000 monkeys with access to the discount window would be severly challenged to post a loss. No - we are confident that Morgan Stanley is doing the prudent thing and not taking on excess risk (something which incidentally allegedly cost the former CEO his job). And as everyone knows, Wall Street is all about moderation and the cautious refutation of any investment thesis where the Upside/Downside is a floating point less than infinity. (pro forma for taxpayer bailouts)
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do they just run multiple models and tell us the one most favourable for them is reality?
Any second-hand bucket shop worth their whiskey might run all of two contra models every marketing cycle, sending call A (ex: go long xyz) to 100,000 mort prospects and sending their Portfolio B call (ex: go short xyz) to a different 100,000 morts.
Next cycle, they cull the 100,000 winners from last cycle's call and send call A2 (ex: go long abcd) to 50,000 morts and call B2 (ex: go long wxyz corp) to the other 50,000.
Repeat once more and you have 25,000 prospects that think you are a freaking genius, having been correct 3 out of 3 calls!
"If you would have only listened to me 3 months ago, Mrs. Smith, your $100,000 would be worth $170,000 today."
Of course this is illegal, and Mary Schapiro's crack team of trany-porn addicts are ever vigilant in tracking down such schemes. However, if any of the 175,000 out of 200,000 prospects that received a bad call make any noise with the SEC, then simply send a retraction that this was just a "model portfolio" and no real losses were incurred. Include a copy of The Crying Game and you're probably safe from any investigation.
Disclosure statement: HH makes no claim that MS is worth its whiskey.
Nice. That sums that up...
Classic sleaze strategy...that con has gotta have a name, it's been around forever...?
I'm sure xxx appreciates the "clarification" ;-)
VaR is still a joke, despite the "clarification."
Well, I am absolutely sure that Morgan Stanley is clearly satisfied with your reply.
TD, on reconsideration, you are wrong.
Actually, you should apologize, just as Joe Barton (R. Texas) did to BP.
After all, it is your lack of understanding on modern finance.
VaR, how quaint and antiquated when you have the full backstop of the FED.
Clearly this time you have made a mistake and you should be a man about it an apologize.
Joe Barton = Major Arsehole
Hey Tyler, Jim Rogers is on the BBC's HARDtalk right now, if you can watch it in your neck of the woods.
Here's a clip.
http://news.bbc.co.uk/2/hi/programmes/hardtalk/default.stm
Morgan Stanley's motto, "We wish we were as good as Goldman Sachs in doing God's work"
Yeah, OK, model portfolio. Is this the same "model" portfolio that was presented to the Fed window? Cause I could see how that would ensure that Morgan Stanley was in no way "disclosing losses".
Model portfolio = a stress test you do on yourself with the full knowledge you are fucked and need to know only the degree of your fuckedness.
Did they really put xxx at the end of the message??
Saucy..... reckon you could be in there!
"Did they really put xxx at the end of the message??"
Tyler is just trying to make this post turn up on SEC porn google searches...
Well at least they call you by your proper name and have a bearish economist. I think of MS as the least worst.
Ah ah, thanks Tyler, hilarious post as always.
Well we now know that not only does MS read ZH, but they also care enough to want you to publish their "clarification" (to what only God knows)
Personally I like what Morgan Stanley is doing.
They stood on the brink, it scared them, and they have moved back from the edge. Compare that to Goldman or BAC/MER or JPM - who assume they will get bailed out if things go south again.
I think MS will be one of the last investment banks standing when this is all over. Reminds me of Ford after Mulally took over.
Hey man this is the Joke of the day, best of the worst, MS.
I agree, I too am impressed, but this is all relative to their peers.
So I have a different conclusion, I think they will be the last to collapse.
Losses? OMG this word cannot be associated with financial institutions. Lets get rid of the risk word too. Its too negative.
Credability and more credability when the top dogs are after the "little guy". Too much information and too much general education has always been a problem for power structures. Oh my, what a wonderful hammer the information world provides. Did you read today the White House wants the ability to put a net on the net in an emergency---- makes sense???
Three kisses! Tyler, you lucky dog...
I received this message few days ago:
Dear Mr Banzai,
We would appreciate it if you would tag your Goldman Squid related posts with the following legend:
THIS IS NOT AN OFFER TO SELL OR A SOLICITATION FOR OFFERS TO PURCHASE SECURITIES OF GOLDMAN SQUID. THIS POST HAS NOT BEEN APPROVED OR ENDORSED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR JIM CRAMER. THIS POST IS BEING MADE AVAILABLE TO SOPHISTICATED READERS ONLY. FOR DETAILED INFORMATION PLEASE CALL 1-800-SWINDLE.
Best,
Lucas
i need to see Robo's "model" portfolio...
So to summarise:
MS research guys have no idea about risk management, and this is true even in their model portfolios never mind the complex, messy real world that their clients actually live in.
And to conclude:
Logically, having no clue about risk means having no clue about asset allocation, in which case xxx at MS public relations needs to explain to us why MS research should ever be read again.
Keep fuckin' with em.
LOL. Damn, Tyler kicked this guy and MS in the nuts! Beautiful!