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Reflections on Morgan Stanley’s 75th Anniversary
The three elder statesmen I saw on TV ringing the opening bell at the NYSE the other day couldn’t have been more representative of the evolution of Morgan Stanley (MS) over the past three quarters of a century. When I joined just after the 35th anniversary, it was a small, white shoe private partnership with a lock on the crème of investment banking clients like IBM, AT & T, and General Motors.
A great nephew of the original JP Morgan still worked there, was his spitting image, and was trotted out to impress admiring clients. Neatly framed on the wall in the chairman’s office was US Steel (X) share certificate No.1, signed by Andrew Carnegie himself. One of the first deals I worked on was the breaking up of Ma Bell into the baby bells.
Parker Gilbert was chairman, the son of one of a handful of men who rebuilt the firm from the wreckage of the Great Crash and the passage of the Glass Steagle Act. I knew him well as one of the blue bloods who ran the firm, a genteel, polished, Ivy Leaguer, who exuded fine breeding and confidence. I once spent an afternoon with him in the back of a Daimler limousine driving around London, shopping for thousands of dollars worth of high end fishing gear, so he could accept an invitation to a Scottish private estate perfectly appointed. If Parker hadn’t landed the top job at MS, he probably would have been running another exclusive gentleman’s club, like the Jockey Club or the New York Yacht Club.
John Mack was one of a new generation of brash, street fighting, in your face, bare knuckled traders who forced the firm, kicking and screaming all the way, to make a fortune in proprietary trading. Mack, known internally as “Mack the Knife”, was of Lebanese origin, and could not have been more at odds with Morgan Stanley’s elitist origins. He once lured a star trader away from Solomon Brothers, and then fired him on the first day. The few female employees we had then cried in his mercurial presence. But there is no doubt that the profits Mack reeled in saved the firm from a takeover down the road, rescuing it from the fate of Solomon Brothers, Kidder Peabody, Dillon Read, and Drexel Burnham, assuring its place in the big league today.
I was one of the few who bridged the two generations, comfortable from my journalism days with moving in Olympian circles, but coming from humble, rural origins. We took the 1987 crash in stride, but during the dark days of the financial crisis, when the share price plunged below $6, it seemed the firm was out for the count. Mack saved the firm a second time, successfully demanding a huge equity infusion from the Mitsubishi Group in Japan (great move, John!), while simultaneously holding at bay the wolves from Wall Street and Washington. What better year to have a junkyard dog as CEO than 2008?
James Gorman joined after I left, and appears to be a modern day suit. A professional and talented manager to be sure, but lacking the flash, the panache, and the balls of earlier generations. He is symbolic of the class of professional administrators who have been brought on board to run what has essentially become a gigantic utility.
I have seen MS grow from 1,000 to 60,000 employees. The dividend today is more than the total market capitalization of the company back then. Parker summed it up all nicely when he said his “mind was blown” by the present size of the firm and how far it has gone. The partners of Morgan Stanley today are well aware of the immense value of their brand and franchise, and I have no doubt they and their descendants will be milking it for at least another 75 years. And if you believe in the yearend rally scenario, as I do, this would be a great stock to own.
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I'm with Cerulean and Juiced Gamma: how can you write about MS without mentioning how Mack got outplayed and driven out by Phil Purcell and the Deany Weannie crowd?
What you may remember as a powerful, elite, "white shoe" firm, was replaced by fund of the month phone jockeys.
Somewhere in here there is a good joke about Sears once owning DW, DW then owning MS, Sears now owning Kmart, so now Kmart has replaced MS, but it's friday and I don't want to put all the links together.
"When I joined just after the 35th anniversary... One of the first deals I worked on was the breaking up of Ma Bell into the baby bells. "
This divestiture was 1984 if memory serves me correctly... 75th - 35th = 40
1970 != 1984
Am I missing something?
Welll if you say so .... but lasting another 75 years assumes a lot.
1) They weather what seems to be an upcoming class war between the ruling class and the oh so common man.
2) They weather the dollar breaking through the 62 year barrier (or not) which no fiat currency has ever survived
3) They weather the thrid world war predicted by Albert Pike, George Washington, Nostradamus and the Hopi.
4) They weather the asteroid that is supposed to hit the earth in 2036 (after hitting the keyhole between the earth and moon in 2027)
5) They weather a cultural evolution foretold by "The Fourth Turning" in which there is a return to more basic moral and ethical standards.
6) They weather the preditary instincts of their Wall Street comrads as their industry becomes more reviled, more competitive, less lucrative and much smaller.
7) They survive the evolution of capitalistic societies into ever more paranoid and controlling states.
The next 30 to 50 years are going to be "interesting times". 75 years is not a given.
2) They weather the dollar breaking through the 62 year barrier (or not) which no fiat currency has ever survived
This. These suckers are toast.
Morgan Stanley ceased to exist when it was subsumed by Dean Witter, only the moniker survives of what was once, and never to return, a great firm.
I'd be willing to bet MS won't be here in 75 years. The Ponzi fractional reserve FIRE system will have collapsed LONG, LONG before then. I can only hope that what replaces it is more stable, leads to more freedom, and allows individuals to earn and store the value of their labor without the constant skimming of a private Federal Reserve. Give me liberty or give me death!
I am not entirely sure about John Mack. He was my boss in the 80's and was both feared and loved.
But I think that he epitomizes the Peter principle.
When he merged MS with Dean Witter, (the aristocrats and the hillbillies), guess who won the fight. Not Mack
Then he went to Credit Suisse as a saviour and had to leave pretty soon.
Then back to MS where he put pedal to metal on mortgage back trading and almost blew up the firm
He is more representative of the Wall Street people of the last 25 years who confused genius with a bull market
Take a look at Mack's compensation compared to Purcell's and it is exactly equivalent to the accelerated leverage which later BLEW UP the firm-- all that money is not coming back to shareholders, or taxpayers or the people who bought AAA crap, but it sure does stay in the pocket of those who got comped on the leverage---
I wasn't surprised but it was disgusting to see Mack speak to in an interview early Oct. 2008 like he was proud to say, 'we learned that leverage works both ways.' --for a guy in his position to make a joke like that when in fact the firm was BROKE at the same time that Lehman was but saved by the conspiring of a broadcast message from paulson and bernake that Lehman wouldn't be saved (get your CDS's , shorts, puts and the kitchen sink bet on it) --with all affiliated hedge funds and the prop desks betting on this, then the big back door paying of the bet by treasury (by paying the CDS's off ) it was just sickening!!! Washington didn't care, they prescribed the whole thing by denying the 6 billion loan to Lehman and stalling thier bank holding status, while paying the CDS's through the immediate save of the biggest writer of Lehman, none other than AIG...and the bullshit mantra that there were no laws to "unwind" the toobigtofail, is toomuchbullshit to endure...it would have taken ONE DAY to ask for authority to unwind any one of these entities if indeed we had a government that wasn't working to pass tax income for generations to these glorified thugs.
+ 1000
Spot on.
I would'nt own this piece of crap run to daddy warbucks when things get tough company for nothing. They belong on the dust bin of history.
NOTHING LIKE GOOD RESEARCH
http://williambanzai7.blogspot.com/2010/09/future-of-markets-specimen-re...