Wall Street Winces at Writedowns

Trone downgraded Morgan Stanley to in-line from outperform, while Mayo left Morgan's rating at buy. CreditSights puts Morgan Stanley's problems at the bottom of the brokers' list, and estimates that it may take the firm just a half year to earn back its losses.

By contrast, Bear Stearns tops CreditSights' problem list, and may take more than 18 months to earn back its losses, says the firm.

Sanford Bernstein's financial analyst Brad Hintz says in a note Wednesday that while the market is clearly pricing in a fourth-quarter writedown for Morgan Stanley, "We don't see how anyone can determine this from the analysis of the public data."

He notes that Morgan Stanley was not a major mortgage-backed security or CDO underwriter -- putting it in a relatively less dangerous spot than many of its competitors. But he also adds that in a recent conversation with Morgan Stanley CFO Colm Kelleher, the executive said it may take three to four quarters for the fixed-income market to return to normal operations. Hintz maintained his outperform rating for Morgan Stanley.

It seems analysts, like investors, have decided it's better to be cautious as they tire of being caught off-guard by surprise writedowns stemming from these opaque asset-backed securities markets.