Wednesday, 17 September 2008

Goldman and Morgan Stanley on the slide...

Here we go again......

Sept. 17 (Bloomberg) -- Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. securities firms, tumbled the most ever in New York after a government rescue plan for American International Group Inc. failed to ease the credit contraction.

Goldman fell as much as 23 percent on the New York Stock Exchange and Morgan Stanley plunged 44 percent, leading financial stocks to the lowest level in five years

It would be ironic if this crisis finished off the big five US investment banks; Bear Stearns; Merrill Lynch; Lehmans; Goldman Sachs and Morgan Stanley. Some might even call that justice.

1 comment:

Anonymous said...

I've been predicting the screwing of Goldman's and MS since December, on account of their hideous level 3 asset levels.

Seems I was wrong.

Yes, they are insolvent for that reason, but the reason they dipped today is an old fashioned bank run. 80% of their funding is the overnight wholesale market and they used it to buy long term assets. Now that cash has vanished (e.g. Fed overnight rates temporarily 6% and in Russia it was 11% and so bad they closed the market) it's a wholesale bank run.

It's a truism of finance that almost all collapses are due to the simple mismatch of borrowing short and lending long.

How the hell did GS and MS not learn that lesson? I guess it's what happens when you let Essex wide boys (traders) and maths geeks (quants) run your money. Better leaving them in Islington market and World of Warcraft respectively.