This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Morgan Stanley's $4B Week: Street Whispers

NEW YORK ( TheStreet) -- Morgan Stanley (MS - Get Report) sure made the most of the four day week last week, adding 14%, or more than $1 billion per day to its market cap.  

Upgrades from CLSA analyst Mike Mayo and JPMorgan's Kian Abouhossein were clearly big factors, as is the expected resolution of a dispute with Citigroup (C - Get Report) over the value of the Smith Barney wealth management joint venture. Keefe, Bruyette & Woods analyst David Konrad argues the disagreement is likely to be won by Morgan Stanley.

Assuming he's right, Morgan Stanley shares could see an additional pop. Still, its hard to envision Morgan Stanley outperforming other big banks for an extended period. Abouhossein argues the bank is pursuing "the right strategy" in shrinking its fixed income unit, while Mayo contends investors want a "more aggressive restructuring" of the business. Abouhossein writes that the bank's capital position is stronger by certain metrics, while Mayo offers a complex formula looking at credit default swaps spreads over three different periods to arrive at a price to tangible book value that exceeds Morgan Stanley's current one by a healthy margin.

Still, none of this analysis presents a compelling case that Morgan Stanley is moving in a radical new direction. Mayo might agree. He contends in his report that shareholders will push for radical changes soon if the company doesn't start to deliver better results.

But what kind of radical changes might we be talking about? Morgan Stanley has revamped its fixed income business so many times in the past few years even its own traders must have lost count. A fresh analysis of capital levels or historical swap spreads can only take the stock so far. The dispute with Citigroup over Smith Barney--the companies are $4 billion apart in assessing the value of the business--mostly serves to highlight the fact that Wall Street still lives in a fantasy world of accounting maneuvers. Morgan Stanley may win this round with Citigroup, but it will lose the next one, or the next. With suspicion of the securities business at an all-time high, nothing short of sustained, real earnings over a few quarters will satisfy investors that Morgan Stanley has turned the corner.

-- Written by Dan Freed in New York.

Follow this writer on Twitter.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $37.81 -5.14%
MS $22.67 -6.90%
AAPL $95.01 1.05%
FB $99.75 -4.15%
GOOG $682.74 -0.12%


Chart of I:DJI
DOW 16,027.05 -177.92 -1.10%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs