Is Morgan Stanley's Biggest Asset Their Debt?

Tyler Durden's picture

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Henry Chinaski's picture

They should put the money they don't have into STRIPS.

max2205's picture

This explains exactly why US accounting rules are FOR SHIT.


slewie the pi-rat's picture

the lipstick the accountants are putting on the 3rd quarter pig will set new fashion & beauty standards!

Ahmeexnal's picture

CME issues another margin hike today: 15% on copper.

Expect Ag and Au margin hikes tomorrow or friday.

CompassionateFascist's picture

Here's an item which arrived in today's mail that may offer a more direct insight into the state of the TBTFs. The local branch of one such is offering $150 up front for a 90-day deposit of $10,000, $500 for a 90-day of $20,000. Still hoping that this train won't go over the cliff until summer 2012, but I don't know....

Cynical Sidney's picture

i too received a stack of those in the mail.

call your congressman email your senators to urge them to look into FAS159 'fair valuing option' of debt obligation

as their constituents it's your prerogative, your duty to press them into action

this cannot be tolerated book value on equities then fair value on liabilities

tb2f translates to 2big2be saved, 2unhanded2fall, 2corrupted2fail

these banks are leveraged to the extent that even if they rob us clean suck us dry

as they have been doing in the past, the 2b2f banks would as as soon all go down in flames

due to their over-exposure in overseas markets. bring it to the attention of your congressman

electoral support henge on the course of action taken by your respective representatives.

The Big Ching-aso's picture

Especially if they shave its legs and have it wear pumps.

Bendromeda Strain's picture

Does this debt make my asset look big?

Foxinsox's picture

Not just US, these rules are almost identical under IFRS!

oogs66's picture

it is 2008 again!  cramer was wrong

X.inf.capt's picture

more like the1930's...if were lucky...

Comay Mierda's picture

More like 1776, revolt against the interest bearing currencies peddled by the banking cartel of england, return sovereignty to countries around the world

Ahmeexnal's picture

More like 476, when the german barbarian Odoacer betrayed Romulus Augustus and the Roman empire was officially done for.


mossme89's picture

More like the beginning of the millenium when the Internet bubble popped and we were all about to die because of computers. Only this time, the computers own the market. OMG!

Freddie's picture

SkyNet and the algos run the show now.

Comay Mierda's picture

Difference this time around is that our fearless leaders will engineer major false flag attacks or start nuclear war to distract the sheeple from their wealth consolidation

Bartanist's picture

Right now, it looks as if the group "Anonymous" is untouchable by the Feds, CIA, NSA etc. They can hack anything and get away with it. How is this possible? It only seems to make sense to me if "Anonymous" is a US government operation (or maybe run offshore through a cooperative government).

Why would they do this?

Look what is happening outside of Wall Street in the park.

My guess is that the end of this story is already written.

- Anonymous, the hackers built up in the media to be untouchable, crash Wall Street.

- The OWS protestors are portrayed as winning and everyone wanting to see those evil Wall Street types punished feels good and yet poorer

- The fraud is unrecoverable and buried under data rubble comparable to the way the $2.3 trillion was buried in the Pentagon attack and the ENRON fraud data was buried and quickly carted away from the building 7 destruction.

- Someone will once again steal a boatload (of gold or whatever) as part of the operation

- And we will find Silverstein-like complicit parasites benefitting from the destruction.

It is the only way I can tie the three seemingly unrelated pieces together that makes sense.

topcallingtroll's picture

I am thinking more like 76 CE or AD if u prefer

faustian bargain's picture

How about that time when Cain killed Abel because he was God's favorite...

The Fonz...before shark jump's picture

But bonus season is coming up...

Smithovsky's picture

Maybe some of this profit comes from their mark-to-fantasy book

Alea Iactaest's picture

Maybe some of it comes from writing puts the whole way down knowing they will expire worthless.

Smithovsky's picture

Or writing OTM calls on themselves, knowing those'll expire worthless as well.  

wombats's picture

Maybe they can swap them for BofA bonds.

G_T_A_44's picture

2008 was merely the appetizer. What's forthcoming (and presently in the works/early innings) will make '08 look like childs'play.


Furthermore, they're all Barbi-Qng the books!

Manthong's picture

" I do not understand exactly how banks account for spread widening in their P&L."

  I do.

pragmatic hobo's picture

didn't lehman do this?

Belarus's picture

The large PD's and banks are all virtually bankrupt. It's just about pretending until one day their earnings outrun their balance sheet losses...

It's how it's done in America. Only problem is: there is and will be no growth. I heard Jamie Dimon talking about how everyone is underestimating the consumer because the are saving 5% and that their incomes are going up. So if they keep spending the same 95% and their incomes are going up well then, according to the Chief of Ponzi JPM, that will be amazing for the economy.

But wrong, and wrong Jamie. The problem is the 1 trillion in Disposable Income Growth since 2007, which gives way to the personal consumption line, has been solely benn attributed, or at least 80% of it, to two things: lower taxes and transfer payments for the United States Treasury. Lower taxes from borrowed money and transfer payments from borrowed money. 

With GDP at 2%, at best and only if you've got your rose colored glasses on anyway, there is no way to get real growth, not statiscal B.S. like measuring GDP in a vacuum. but no kidding real growth. And so what happens when you take away the punchbowl: the lower tax base and/or the transfer payments to try to plug the unfunded hole? 

Yup, Jamie Satan Dimon, anyone listening to you is going to get flogged and fleeced. Back to MS, they are basically fucked but no one will ever let them be...."here we come taxpayers, yet again" should be the TBTF's slogan.

Belarus's picture

One other point, you just know Buffett buying the preferred on BAC is a bad omen for the tax payer. This is cut and paste script for him from the 08 crises. He knows BAC is TBTF, and since management has been somewhat replaced, you just know they will be recapitalized when they are virturally down under.....leaving, of course, Buffett's preferred nice and peachy. 

And this should be considered inside information, because we know Obama will call Buffett to ask him what they should do when BAC ultimately bites the bullet. 


Joshua Falken's picture

Morgan Stanley are using cheap money to levereage their delta one, algorithmic and high frequency trading desks.  All the "hot shot" proprietary traders have gone to be replaced by floors of sales/traders constructing every possible iteration of linked and packaged structured product baskets and ETF's to be sold globally to private bankers and financial advisers.  

The initial selling margin is good, but the real edge comes in trading and manipulating the underlying basket to their own advantage.  Just look at how Morgan Stanley's VAR has balloned in the last few years as these programs require vast resources, but little unhedged outright underlying exposure (unless you have a Kerviel or Adoboli in your midst). Talk at the water cooler is that the delta one, algorithmic and high frequency trading desks are making out like bandits.

This is all very clever and makes loads of money at other peoples expense and certainly doesn't treat customers fairly.  

The unravelling comes when counterparties, credit, currencies or interest rates give birth to a black swan and Morgan Stanley's funding tightens.

Everyone thought Drexel Burnham, Bear Sterns and Lehman would be alright until they were not.

If you want to see the future - look at  and

buzzsaw99's picture

This is dorked up. Their bonds are crashing so they book this as a gain, however if they buy the bonds at less than par on the open market then they are in default? Corporate accounting ubersux. Somehow I know this is going to translate into more bonuses. Pass the booze.

rocker's picture

Most believe that the market will mimick 2008's decline, and it may.

I am just thinking about all the bullish talk from the pumpers and risk on crowd pounding the table.

I have never heard Bloomberg so bullish everyday. Every rally is explained as investors buying stocks.

Never explained as a Short Covering Rally.  Surely Robo is buying PCLN, CMA, and AMZN.  This has just got to be bullish.

Right ?    LOL    Not with my money.   I have to see real capitulation.  I have not.

Keeping Capital is more important than growing it at this point.  Including my Physical PMs.

buzzsaw99's picture

I'll take "what is the opposite of a kitchen sink quarter" for $200 Alex. This smacks of bonus conjuring to me ala JPM booking loan loss reserves as profit. Call it the "desperation scraping the bottom of the scuz bucket turning shit into champagne quarter" if they do this.

Bendromeda Strain's picture

The Cold Duck Quarter! Enough cold ducks and a black swan is not required.

Prometheus418's picture

It won't mimic 2008.  The period between crashes was too short, and most people never recovered- when it goes again, it's going to turn millions off from any kind of investment at all, probably for good.  The fact that shorts keep getting slammed by last-second algo driven rallies isn't helping, either- retail investors might be willing to adjust and learn new strategies, but not when every attempt leads to losses.

Bankers and hedge funds will trade amongst themselves for a while, I'm sure- but eventually, it's not going to be much fun for them, either, as the money is just shuffled back and forth, with no one left to fleece.  

I expect that from here on out, there will be a few generations that won't put a nickel in a bank, and keep thier savings in coffee cans and under matresses.

unununium's picture

buzz, I don't know where you get that buying for < par is a default event.

Rather, Tschir thinks maybe these fantasy earnings disappear IF company is in default.

Nobody has mentioned the most infuriating thing, which is that FASB lets these assholes mark everything else to fantasy, but mark this one item to market since it is the one thing that results in a benefit.

All semblance of fair accounting has disappeared.  God save us.

Schmuck Raker's picture

Where have I heard of this type of stunt before?

Maybe it's the rum talkin', but I could swear that back in '07-'09 this sort of story was floating around about somebody.

Any of the Gurus-That-Be remember ish?

buzzsaw99's picture

enron, and more recently merrill were both fond of buy-back shenanigans.

Schmuck Raker's picture

Thanks Pete, Tyler, and Buzz.

I should have never doubted the rum.

faustian bargain's picture

I bet there's some stuff in the Zerohedge archives if you search for Repo-105.

The4thStooge's picture

So basically they've got a bunch of bad dynamite laying around that could go off at anytime, and to keep themselves from blowing up, they're gonna buy back some of the dynamite they've sold to other firms. Sounds like something a suicidal financial terrorist would do.

Sequitur's picture

Great post. This is the only thing these goddamn banks and their client "technology" is good for: massaging the books and bullshitting the market. Hire some vapid accountants and lawyers to pass on this FASB accounting a la Enron, Worldcom, Quest.

chump666's picture

MS is pile of crap.

Watching Asia's thin volume melt-up.  Tasty.

Lets see, three days of meltups, thin volumes (asia) somewhat tightening on Asian CDS's, European 'leaders' are now clinically insane, US markets rallying on panic buy-ups...

Next week will be a bloodbath.




Big Ben's picture

Could the MS executives be pulling out all accounting stops hoping to print one last good quarter before everything falls to pieces?

It could be that bonuses are computed based on earnings, regardless of whether or not those earnings come from accounting gimmicks.

The MS equation: (shareholder_equity) + (taxpayer_bailouts) = executive_bonuses

Sambo's picture

The CEO told the other MS employees not to expect big bonuses this year.

If they are going to have a great qtr, why hold back the bonuses?