Twitter
Advertisement

‘Morgan Stanley could be next’

Investment bank Morgan Stanley could be the next target of the US financial crisis that has felled some of the biggest giants of Wall Street, says a 30-year veteran bond trader

Latest News
article-main
FacebookTwitterWhatsappLinkedin
HONG KONG: Investment bank Morgan Stanley could be the next target of the US financial crisis that has felled some of the biggest giants of Wall Street, says a 30-year veteran bond trader who lived through the October 1987 ‘Black Monday’ stock market crash.
 
“If I were to take the next target, it would be Morgan Stanley...  I think they’re next in line,” says John J Jansen, who began his career at the Open Market Desk of the Federal Reserve Bank of New York and spent several years trading treasuries and high-grade fixed income products for some of the largest primary dealer firms.

In an interview to DNA Money, Jansen said that, in a sense, “everybody is vulnerable” in this “most unsual time”.

What sets this current crisis apart from earlier ones, such as, for instance, the collapse of hedge fund Long Term Capital Management is that in the latter case, “the crisis was confined to just one firm, whereas here, it’s been a series of rolling crisis one after another.”

“During this cascading crisis of the past 13 months, each time there’s been a rescue package or a bailout, we’ve had a period of relative calm,” notes Jansen. “But this time, it was only a week ago that (US mortgage giants) Fannie May and Freddie Mac were taken over , and we’ve gotten into the next crisis without even a brief period of calm.”

“Central banks and the regulators her and around the world have pulled out all stops to rescue the system, but to be honest it doesn’t seem to be doing all that well,” acknowledges Jansen. “It’s like we’re rolling down the hill, and I just feel it has to end badly.”

On his blog (aroundthecurve.com), Jansen writes, chillingly: “We are, I believe, headed for a very, very ugly end to this story... I truly fear for our economy and our (financial) system.” Asked what his worst fears were, the veteran trader said, “The worst-case scnenario would be that people totally hunker down, nobody trusts anybody else, nobody lends to anybody, and people spend their time building their own balance-sheets and husbanding their own resources and being within themselves.” That, he reckons, would worsen the crisis.

But for all his fears, even he doesn’t think the current crisis will spread through to commercial banks like JP Morgan or Citibank. “Institutions like JP Morgan have massive number of retail clients: mainstream America banks with them, and their funding is much more stable than, say, a Lehman Brothers.” The same, he says, is true of Citibank.

Then again, he says, “if you think JP Morgan and Citibank are at risk, we’re talking about a 1929-like situation (when a Wall Street crash led to years of the Great Depression in the US)... I don’t think see that just yet.”

Capitalism, says Jansen, demands pain. “Good risk is rewarded and imprudent risk is punished. We were engaged in an orgy of imprudent risk-taking for nearly a decade, and now a heavy price will be paid for the violation of so many simple and common sense precepts of trading.”
Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement