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Fox Hunting: Which is it – 88%, 60%, or 35%?

January 20, 2011

“WSJ NEWS ALERT: Morgan Stanley Profit Rises 88%”

Headlines are headlines for a reason — they are saying, “This is important – pay attention.” Corrections on the other hand rarely make the front page. They are tucked away in the back pages in small type. This morning we have a good example of this journal practice and something more.

I rcd a News Alert at 5:14am from the Wall Street Journal stating:

Morgan Stanley’s fourth-quarter profit rose 88% as revenue climbed on gains at its key institutional-securities and wealth-management businesses.

I rcd another News Alert at 8:34am from the Wall Street Journal stating:

Morgan Stanley’s fourth-quarter profit rose 35% as revenue climbed on gains at its key institutional-securities and wealth-management businesses.

(A previous news alert incorrectly reported that net income rose 88% in the quarter.)

The New York Times reported:

Morgan Stanley swung into a profit in the fourth quarter, as earnings rose almost 60 percent, to $600 million, or — good news for a Wall Street bank that has been struggling to turn around its operations.

The numbers matter for as the WSJ pointed out in their newspaper edition this morning, there is a reluctance on the part of investors to wade into the waters of the likes of Morgan-Stanley and Goldman because new financial regulations may or may not be followed, and if not followed, will lead to the same risky behavior that brought the markets down in 2008.

The lackluster performance ended one of the bumpiest years in the firm’s 142-year-history with a thud that deepened questions about how Goldman, Morgan Stanley and other securities firms can expand without revving up some of the same risky practices that helped cause the financial crisis.

Like its rivals, Goldman is being hurt by the reluctance of many institutional investors, wealthy individuals, companies and other clients to take risks because they still are reeling from losses during the crisis. Hedge funds are weaning themselves from some of the leverage used to make big bets, and U.S. companies are holding more than $2 trillion in stagnant cash.

We will likely see more of this juggling of the numbers and it will be up to each person to do their due diligence to sort out what’s what – I know, ironically I am attending a Morgan-Stanley symposium this evening. I will report back on what I hear.

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