John Mack Hit With More Flak

The defining moment of John Mack's career is upon us. Will he be able to pull out of the nosedive or will he parachute to earth?

The CEO of Morgan Stanley (MS-NYSE) watched his stock plummet Thursday; the timing is curious given that the restrictions against shorting financial stocks were lifted Thursday, and a swarm of killer bees descended from Hedgistan to exact a little revenge for Mack's recent lobbying efforts that put a serious hurt on the hedge fund community over the past month:

Short-sellers, those investors who wager against stocks, took renewed aim at the firm. At midnight on Wednesday, regulators lifted a temporary ban on short sales. Mr. Mack had angered many hedge funds by lobbying for the restriction. New York Times

Of course the timing could not be worse for Mack as he tries to nail down a capital injection from Japanese bank Mitsubishi UFJ. And if that is not bad enough the ratings agencies are rearing their heads at an inopportune moment, with Moody's putting their debt on review for a possible downgrade just as Mack tries to seal the deal with the Japanese.

I find it remarkable regulators did not extend the short selling ban for a few more days, which would have helped Mack and Co. immensely. And the action by Moody’s is almost comical.

When it rains it pours.

Morgan Stanley stakeholders are sweating bullets, even taking to the internet to haze bloggers with the temerity to question their ultimate fate.

And while Morgan Stanley would appear to have a deal sewn up, the crash in Asian markets overnight are the latest wrinkle in the drama.

One thing is clear-the hedge fund community despises Mack at this point. They blame the SellSide for abusing their market maker privileges, and the leverage Mack employed is considered irresponsible by many of the hedge funds who are rarely more than 70% net long.

Mack’s lobbying of financial market regulators is the cardinal sin, many hedgies blame him for impeding their ability to properly hedge and very high profile hedge funds are in the process of liquidating as they wind down operations.

Can we blame “the Bankers” for everything? I don’t think so, but hard core BuySiders want to see Mack with a tag on his toes. This is hand to hand combat, and I am having a hard time finding any winners.
_________________________________________________________

A race against the clock....MS 5-day chart
_________________________________________________________

Morgan Under Assault
New York Times

Morgan Stanley Rating on Review at Moody’s; Goldman Outlook Cut
Bloomberg

Analyst casts doubt on Morgan Stanley
MarketWatch

Crude-How Wall Street Is Screwing America
Long Island Press
--------------------------------------------------------------------------------------------------------------
The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

Comments:

<< Back to main