Why? The chatter is that this giant is tottering but why? Surely the mortgage meltdown is already internalized? Perhaps readers can set me straight and explain?
Some say it's exposure to Lehman Bros.
Whatever the reason shares of Morgan Stanley plummeted today. Shares of Morgan Stanley 43 per cent even after reporting better-than-expected quarterly earnings on Tuesday.
3 comments:
Market Psychology.
Stocks and markets are worth what investors think they are worth - no more and no less.
That is why a solid financial infrastructure that can be relied upon at all times is essential to a healthy functioning markets.
When the giants of industry or the giant of the financial marketplace begin to fold (despite assurances for months that they were fine), then everyone becomes suspect.
There was no good reason (based on numbers alone) that the markets lost 90% (that is not a typo) of their value during the Great Depression either. But they did anyway.
It should never reach that point, but this is the most significant financial crisis in the US in decades.
So, again, it is psychology at this point, not rationalization.
I also wonder if there are short sellers of MS common shares hedging their MS credit default exposure with common shares. As the probability of default increases, the more common shares you have to short, kind of like when you are hedging a short option position and the underlying moves toward the strike price.
(sorry to get technical)
Just a possibility...
Here is the best article I have seen to describe what is going on from an economic perspective:
http://finance.yahoo.com/banking-budgeting/article/105785/Worst-Crisis-Since-1930s-With-No-End-Yet-in-Sight
Plus I learned a new term - "deleveraging"
Try tossing that about at your next cocktail party ; ). Unfortunately I think everyone will know it soon enough.
Post a Comment