As I said, the Riskiest Bank on the Street

By: Reggie Middleton | Thu, Sep 18, 2008
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For all of those who had/have a buy on Morgan Stanley, contact me for a special institutional subscription to the blog. I have said Morgan Stanley is a very strong short candidate (for about 9 months now).

Wall Street has said the following (from, ABR = average broker recommendation):


Current ABR


ABR (Last week)


# of Recs in ABR


Average Target Price:


LT Growth Rate


Let's see what John Mack, Morgan's CEO says behind closed doors... In the NY Times:

Only a day earlier, Morgan Stanley defended itself from growing doubts about its future, issuing a fairly positive earnings report (Nottt!!) to ward off concerns about its health. But the fear that gripped markets after Lehman Brothers failed also enveloped the firm.

Seeking to avoid the kind of fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley's chief executive, made an unsuccessful effort on Tuesday evening to persuade Citigroup's chief executive, Vikram S. Pandit, to enter into a combination, according to people briefed on the talks.

"We need a merger partner or we're not going to make it," Mr. Mack told Mr. Pandit, according to two people briefed on the talks. Mr. Pandit, a former senior investment banker at Morgan Stanley, said Citigroup was not interested. It is thinking of deals it can strike with consumer banks, like buying the struggling Washington Mutual out of bankruptcy if its reported efforts to auction itself should fail, that would provide it with cheaper deposit funding. A Citigroup spokeswoman declined to comment.

Having failed at that, Mr. Mack entered into discussions on Wednesday with Wachovia and several other banks, people briefed on those discussions said. The talks with Wachovia are preliminary and a deal may not emerge. The banks declined to comment.

Let's take a look at the Golden Boys:

Look at what I said vs what the guys that most retail investors and family offices give their money says...


Current ABR


ABR (Last week)


# of Recs in ABR


Average Target Price:


LT Growth Rate


This is the verbage (that's verbage, not garbage) that accompanies these reports via hyperlink:

Recommendations Research Page

Brokerage Research firms spend over a billion dollars a year to fully analyze and recommend stocks to their clients. Most of that expense is paid out as compensation to a group of highly intelligent, and well compensated, equity analysts. It is usually in your best interest to know what these Wall Street heavy weights think about your stocks before you make buy, hold, sell decisions. And there is no better place to gather that information than on the Recommendations research pages on

Okay bloggers and bloggettes, this doesn't make any damn sense. Why would anyone not want to subscribe to truly independent research is beyond my reckoning. Mediocre independent research is better than top notch biased research any day. Just imagine what mediocre biased research will offer you.

I know I may be a little biased on this topic because I may stand to gain from selling subscriptions, but let me make this very clear - I am an investor first and foremost. That is what I do all day, everyday. The blog always has, and probably always will, operate at a significant loss.The only reason I am bothering to make this post is because I am absolutely awed by the stickiness engendered by the sell side brokerage marketing machine. One would think that this site (or any independent research site) would be oversubscribed, if anything just because there is chance they may be trying to tell the truth. Okay, rant and rave is now offline...

If one were to consider the downloadable reports and analytical html posts that I offered for free to be recommendations akin to the Zacks chart above, the following would be the approximated cash returns.

post date
Price as of
Blog Date or
trading day
6/23/2008 % change Assumed
Holding Period
in Months
2-Sep-07 1-Sep-07 len $28.57 $12.72 (55.48%) 12.57 103.65%
    hov $12.60 $7.14 (43.33%) 12.57 81.18%
    ctx $29.12 $14.72 (49.45%) 12.57 93.41%
    dhom $2.08 $0.55 (73.56%) 12.57 141.62%
  1-Sep-07 bzh $11.29 $6.55 (41.98%) 12.57 78.48%
  1-Sep-07 bsc $114.13 $9.43 (91.74%) 12.57 174.30%
    cfc $19.81 $4.25 (78.55%) 12.57 151.60%
  3-Sep-07 mbi $61.92 $9.71 (84.32%) 12.50 163.15%
    abk $64.63 $5.77 (91.07%) 12.50 176.65%
  8-Sep-07 wm $34.74 $2.01 (94.21%) 12.53 182.94%
  16-Oct-07 ryl $23.96 $23.76 (0.83%) 11.27 (3.82%)
  19-Dec-07 ms $50.08 $21.75 (56.57%) 11.27 107.65%
  8-Jan-08 ggp $33.90 $20.37 (39.91%) 11.27 74.33%
  19-Feb-08 leh $53.57 $0.13 (99.76%) 6.97 196.94%
  8-Feb-08 ago $21.57 $13.04 (39.55%) 7.33 76.52%
    ms $45.28 $21.75 (51.97%) 7.33 101.36%
    wfc $31.69 $33.43 5.49% 7.33 (13.56%)
    gs $177.36 $114.50 (35.44%) 7.33 68.31%
    wb $34.72 $9.12 (73.73%) 7.33 144.89%
long 17-Mar-08 bsc $4.81 $9.33 93.97% 6.03 180.18%
  27-Mar-08 kfn $12.71 $6.53 (48.62%) 5.70 94.67%
  2-Apr-08 jef $17.15 $19.31 12.59% 5.53 -27.76%
  15-May-08 pnc $69.39 $71.96 3.70% 4.10 -9.98%
doo-doo list 22-May-08 bpop $11.52 $8.00 (30.56%) 3.87 58.54%
    wm $9.45 $2.01 (78.73%) 3.87 154.89%
    cfc $4.69 $4.25 (9.38%) 3.87 16.19%
  16-Jun-08 ge $28.97 $23.39 (19.26%) 3.07 35.95%
  Average Average
  7.82 75.62%

I would like everyone to mail this post to anyone who thinks shorting investment banks should be halted. With a performance recorded like the one's stated above, it is no wonder why managment finds their own investment performance to be a magnet for short sellers. Feel free to run any stock in blog table above through the ABR query and report your findings back to the blog.



Reggie Middleton

Author: Reggie Middleton

Reggie Middleton

Reggie Middleton

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

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