Morgan Stanley or "The Moose" as us Traders so affectionately call them, rallied nicely intraday yesterday, after not participating in Friday's financials rally.
The Moose has been strong of late (Good Looking Chart), but does that mean that the company no longer needs to do the following?
1-Stop Write downs and Reserve Build Up?
2-Raise significant amounts of cash so they can pay back the TARP money?
3-Cut the dividend?
4-Reduce leverage?
Chief Executive John Mack was on Bloomberg (Give him some credit) stating the dividend is safe, what else is he going to say? If The Moose wants to pay back the TARP money as they have publicly stated, they need to raise significant cash. Why would Mack say he is cutting the dividend in front of a public offering? Think people!
Lets give the Moose some credit, they have made strides with their liquidity and have reduced their leverage, you have to remember, they have filed to become a Bank Holding Company, so technically this was a must. But what is worrisome is that there is talk that they will go back to re-leverage themselves after they pay back TARP. Have they not learned the lesson of too much leverage? Also is The Moose not immune to the same disastrous end of year mark downs in leveraged loan positions, correlation trades, Commercial Real Estate, and CDO/CDS positions like Merrill Lynch. Is the worst over?
Are they immune to the global economy which is getting worse? Their commercial real estate portfolio is large and is the next major danger area in my opinion.
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