The subprime's devastating ripple effect has now taken over another Major IB: Moragn Stanley...Looks like John Mack is gonna be out now like the O'Neils adn Princes.  BTW, the fear just keeps looming as to who's next and how large the number is gonna be.

http://www.reuters.com/article/ousiv/idUSWEN244620071108

 

The entire article:

Morgan Stanley sees $3.7 billion subprime hit

NEW YORK (Reuters) - Morgan Stanley (MS.N: Quote, Profile, Research) on Wednesday said it has suffered a $3.7 billion loss stemming from its U.S. subprime mortgage exposure, which it expects will reduce fourth-quarter earnings by about $2.5 billion.

The Wall Street investment bank said the loss occurred in September and October, and might change before its fiscal quarter ends this month.

It attributed the loss to deterioration in capital markets, which was triggered in large part by the struggles of thousands of homeowners to keep up with mortgage payments. Morgan Stanley said markets may remain unsettled for several quarters.

The loss is the first significant financial setback for Chief Executive John Mack since he took over the investment bank in 2005.

Morgan Stanley joins a growing list of financial companies, including Citigroup Inc (C.N: Quote, Profile, Research) and Merrill Lynch & Co (MER.N: Quote, Profile, Research), to report large write-downs from exposures to lower-quality debt. Those three companies alone have in the last month announced about $24 billion of subprime write-downs.

Some analysts had projected a larger write-down at Morgan Stanley, and the company's shares rose about 2 percent in after-hours trading following the announcement. The shares had fallen for five straight days, dropping 23.9 percent.

"People may be breathing a sigh of relief," said Peter Kovalski, who helps invest $12 billion at Alpine Woods Investments in Purchase, New York. "Industry fundamentals remain strong, so this is the time to address the issue and get it behind you, rather than prolong the problem."

Morgan Stanley shares closed down $3.32, or 6.1 percent, at $51.19 in Wednesday trading. They rose to $52.20 after-hours.

Fox-Pitt Kelton analyst David Trone on Tuesday said Morgan Stanley might face a $6 billion debt write-down.

The $2.5 billion impact on net income equals 37 percent of Morgan Stanley's reported $6.8 billion of profit for the first nine months of its fiscal year.

"We felt that it would take at least a quarter or two for the credit markets to return to a more normal extension of credit, and provision of liquidity," Chief Financial Officer Colm Kelleher said on a conference call. "We now feel it that will take longer, perhaps several quarters, to return to more normal operating levels."

Morgan Stanley also projected "solid" fourth-quarter results in each of its other businesses, including investment banking, equities, wealth management and asset management.

"Morgan Stanley can take the hit," said Sean Egan, managing director of Egan-Jones Ratings Co. in Philadelphia, an independent credit rating agency. "Of all the players we worry about, Morgan Stanley is nowhere near the top of the list."

The investment bank said it has reduced its net exposure to U.S. subprime debt -- defined as the potential loss if all of the debt's value were wiped out -- to $6 billion as of October 31 from $10.4 billion as of August 31.

It has also reduced its total exposure to asset-backed collateralized debt obligations and related subprime debt to $9.3 billion on October 31 from $12.3 billion on August 31.

"There's at least a couple of more years during which you're going to have increasing delinquencies (and) increasing foreclosures, and that will probably lead to increasing write-offs," billionaire investor Wilbur Ross said on CNBC television.

Analysts on average expected Morgan Stanley to report a fourth-quarter profit of $1.83 per share on revenue of $8.83 billion, according to Reuters Estimates.

(Additional reporting by Mark McSherry and Dan Wilchins)

Even the once mighty AIG has been hit!!  Keep em coming:

http://money.cnn.com/2007/11/07/news/companies/aig_earnings.ap/index.htm?postversion=2007110719

AIG earnings fall on tight credit, housing woes

The world's largest insurer, calling its exposure to subprime debt 'minimal,' reports earnings and revenues that fall short of analysts' estimates.

 

Who's next?

 

 

 

 

Goldman Sachs...Even though they've been consistently denying that the subprime's not affected them as yet, I just wonder how much longer are they gonna hide it.  Trading rumors as of this morning were that this was gonna come out soon.  It now looks like the mightiest of them all is all set to fall.

Hey Samsara what exactly is sub prime and what is going on there? All I know is that the dollar value is going down. Why is it going down. I have no clue about the financial market.

Already happened once for GS a while ago though.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/15/cngoldmans115.xml

HAHAHA ...classic case of what goes around comes around? ..high time we had laws against predatory lending practices of subprime lenders and more transparency on credit rating agencies' part before encouraging borrowers to over-state income on loan applications. until then the demise of housing bubble will continue to have its effect on subprime, Alt-A, hedge fund, mortgage, credit foreign bank market (heard brazil and korea have been badly hit recently...) and what not...

what's the dollar rate today anyone?

Yep, It's not looking good at all.

So far, they guys hit badly in the financial sector: Merrill, BOA, UBS, Goldman (more to come for these guys), Citi, Morgan Stanley, Bear Stearns, AIG...Nomura USA is completely out and I guess Lehman, CSFB, BNP are yet to come out of the closet.  All in all, prime brokerage guys can get ready to have their heads rollled in 2008 or transferred to another division.  And in more headline news, a lotta shake-ups in management and the newly appointed CEOs (and remaining ones) can expect not much recovery from this mess until a couple more quarters.

BTW, Shouldn't they have realized and made the laws more stricter after the ripple effect caused by Amaranth last year when one sole trader lost them 6+ billion in energy realted trades.  And the Sarbanes Oxley was supposed to prevent another Enron fiasco but looks like all the IBs in the street have found a way around that too.  As per the Economist 3 years ago, "The houses that saved the world" are the same houses that eventually destroyed everything.

Bhaley, sub-prime is the reason behind the current fiasco thats caused most major IBs to stumble (and some of them real badly) and on a more layman's terms, the reason why the whole Dow index has been tumbling recently.  The blue-chips somehow have all been hit bad.  Why did this happen?  Because of unscrupulous banks and brokers who under the ever rising housing market were giving out mortgages to any individual out there (who could pay their fees) even if they in reality couldn't afford for example a $ 500,000 house.  They did this through stated and no-docs appplications where one's mortgage rate is given through one's credit score only disregarding income or debt.  Also, for brokers and banks, there is more money in commisions in doing these types of loans since the buyer being desparate and with a "sub-prime" credit are willing to give more to get that house/property than someone with an unblemished credit history and high income (low debt to income ratio) would.  These "low credit score, low income and high debt to income ratio" home buyers (which according to estimates are more than 20% of the total $1 trillion+ US housing sector) are given all sorts of financing by the brokers/banks so as to make them think they could afford the house.  Once such tactic is the interest only payments and also the ARM, where a fixed rate is set for a year or more (5 yrs max) and after that period, the variable rate kicks in.  And since these are buyers with "sub-prime" credit, their mortage could rise 3 fold that what they paid in an ARM.  Most think they can refinance, but to refinance its the same as getting a new loan and paying all the closing costs including taxes and broker fees again.  On top of that, with the tightening credit, most of these home owners do not qualify for a refinance.  What happens then?  They cannot afford the payments and the house goes into foreclosure and the bank is stuck with a bad loan often losing hundereds of thousands in one deal thereafter.  How were the IBs affected?  Most banks sell their "sub-prime" risk associated securities in the open market and IBs buy them after recommendations from analysts for what they think is a good price...But with defaults and foreclosures on the rise (and more expected), these securities have backfired as in all cases.  A few Banks and IBs even had$10 billion plus in such securities.  All I can say is that the ever rising housing market was one big party back then for the seller, buyers, Banks and IBs...Finally, the hangover as expected is here.

Loote, USD/INR as of today's fix is 39.34.  So USD/NPR = 62.944 (with 1.6 as INR/NPR).  Not much change here but in the EUR side, the USD hit an alltime low.  Against CAD, all time low since 1974, against AUD, lowest since 1984 and Gold prices is at its highest since 1980...Look for more battering to come for the already Knocked-Out USD.

 

 

what is the point  of this thread ?

Duke, What is the point of you commenting on this?  Its like asking, what is the point of watching the NEWS or rather readin Business News?  Do you even follow the News?  or the analysis thereafter??