Now Morgan Stanley - what next, Goldman? Thursday, September 18, 2008
Image via Wikipedia After a week of turmoil which has seen Lehman declare insolvency and Merrill run into the arms of Bank of America, only two independent investment banks remain - Morgan Stanley and Goldman Sachs. And now the unthinkable is underway - the share prices of these two Goliaths are under attack and the CDS prices for their debt is ballooning.
Every "given" during my working life has been torn to shreds this week. A week ago it would have been unthinkable for these firms to be considered vulnerable. But a day seems an eternity right now and news has emerged in the last 16 hours that Morgan Stanley is already in talks with Wachovia Bank, presumably on the basis that its' management know it may not survive being in the spotlight for long. If this goes through, that leaves just Goldman Sachs - the most respected firm in wholesale markets. Can they withstand the spotlight and hold the hounds at bay - if anyone can give you a categoric answer, then I doubt they know what they are talking about, given the climate we are in.
Along with many others, I have spent the last week in a shock. When the dust settles, it will be a very different [financial] world we face. The game is changing very quickly and the power base of London and New York may have been fundamentally undermined. This leaves open the possibility of markets shifting, especially with the growing might of sovereign wealth funds. International money can move easily and people follow money. Many other places stand very ready to welcome both.