Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Morgan Stanley, Wachovia- Dumbest Merger Proposal In History

Companies / Credit Crisis 2008 Sep 18, 2008 - 04:25 AM GMT

By: Mike_Shedlock

Companies Best Financial Markets Analysis ArticleThis evening, a merger proposal rumored to be under discussion involves Wachovia (WB) and Morgan Stanley (MS).

Inquiring minds are considering As Fears Grow, Wall St. Titans See Shares Fall .


Even Morgan Stanley and Goldman Sachs, the two last titans left standing on Wall Street, are no longer immune. To the surprise of executives within those firms, and their rivals, the stocks of these powerful companies were drawn into the crisis of investor confidence on Wednesday. Morgan Stanley, whose stock fell almost 25 percent, was considering a merger with Wachovia or another bank to help shore up its finances. Goldman Sachs stock fell almost 14 percent, and it had to rebuff rumors that it was seeking a capital infusion.

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

My Comment : One week ago Morgan Stanley posted a ridiculous earnings estimate that only looked good because it took advantage of a financial loophole to write off the value of its debt. By the same methodology Lehman (LEH) would have has a spectacular quarter by writing down its debt, now valued at zero in bankruptcy.

Seeking to avoid the kind fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley's chief executive, made an unsuccessful attempt Tuesday evening to convince Citigroup 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 Washington Mutual out of bankruptcy, that would provide it with cheaper deposit funding. A Citigroup spokeswoman declined to comment.

My Comment : Citigroup declined to comment but I won't. Avoiding a discussion with Morgan Stanley was probably the only sensible thing Citigroup (C) has done for years.

Having failed at that, Mr. Mack entered into discussions Wednesday with Wachovia and several other banks, people briefed on those discussions said. The talks with Wachovia are preliminary and no deal may emerge. All three banks declined to comment.

Mr. Schorr, the analyst at UBS, said the increase in the risk premiums investors are demanding on debt have become self-fulfilling prophecies that now operate almost entirely detached from underlying fact, a thought echoed by people inside both banks and by several investors.

“It's all confidence, it's not reality,” Mr. Schorr said. To be sure, Morgan and Goldman have some problems, including a parcel of troubled mortgage assets and trading and advisory businesses that are vulnerable to a slowing economy. “But that is not what is going on here,” Mr. Schorr said. “It is just a flat out squeeze that should not be able to happen. The negative feedback loop has to be somehow suspended,” he added, “but I don't know exactly how you do that.” Goldman Sachs declined to comment.

My Comment : Count Schorr among the analysts who would not know reality if reality jumped up and squirted grapefruit juice in his eye.

Historic Merger Review

The takeunder of Time Warner by AOL is legendary. Arguably the AOL/TW merger marked the peak of insanity right before the dotcom bust. That merger diluted a relative strong Time Warner with a ridiculously overvalued AOL. However, neither company was ever in financial jeopardy as a result of the merger.

Wachovia + Morgan Stanley

The proposed merger of Wachovia (WB) and Morgan Stanley (MS) is something completely different.

In the current financial crisis to date, the strong have been merging with the weak . This has not accomplished much other than to make the relatively strong, much weaker. In contrast, a merger of Wachovia and Morgan Stanley would be a merger of the weak with the pathetically weak. Conditions are such that it is very difficult to tell who is who.

While both companies have a questionable future, a merger has a certain future: a complete collapse of the combined entity. I doubt this merger takes place.

Addendum:

Chinese bank CITIC interested in Morgan Stanley .

CNBC, quoting unnamed US and Chinese sources, reported that China's CITIC bank is in talks to possibly acquire Morgan Stanley. CNBC also cautioned that no deal is yet certain.

The US Federal Reserve has been encouraging the Chinese to invest in US financial institutions, the sources told CNBC, which noted that CITIC owns the largest brokerage in China.

This is a more plausible rumor but I question whether it happens either.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in