GS and MS, Goldman and Morgan Stanley…… When in Rome…

gs & ms dec 24 2016

Both these “banks” function as “hedge funds”, that is they can go long and short and create all kinds of securities on their own. Obviously the simple fact that they can play the entire spectrum of possibilities gives them an enormous advantage over others that are confined to a much narrower range of the spectrum. This,  and seeing most of the flows, accounts in large part for their enormous profitability. That every second central banker or any other key player call either of the two their alma mater does not do any harm either.

Clearly regulations affect these pretend banks, in fact MS was created in the wake of Glass-Steagall , enacted in 1933 as a response to the great depression, specifically to circumvent the rules. GS on the other hand operated to a degree outside the scope of Glass-Steagall but was reluctantly drawn in by the bailout. Of course Glass-Steagall was repealed in 1999 which has some people conclude ironically that this law was both the result of the great depression as well as the cause of the great recession. Dodd-Frank (2010) is the new Glass-Steagall and Trump has promised to do away with it (and maybe the Fed. as well). His administration-to-be seems to subscribe to the Ayn Rand philosophy of complete and total unfettered selfishness and a government that interferes as little as possible, sort of where we were after 1999 and before 2010 at a time when these stocks peaked. Oddly enough Greenspan was once part of her (Ayn Rand’s) inner circle.

We have no idea if this Trump rally is over or if it has a long way to go, therefore we would suggest that the best approach is to “when in Rome, do as the Romans do” that is be your own hedge fund and short GS and go long MS. Both companies are about the same size, GS has a slightly larger cap. and MS more employees. The spread between the two has never been larger. A ratio of about 6 shares of MS (at $40) against 1 share of GS (at $240) would, more or less, do the trick.  You can achieve something similar with options.

Better yet, listen to this;

Merry X-mas and a Happy New Year.

MS , Morgan Stanley, update.

ms oct 25 2012

See previous blogs as well. When you look at this Yahoo chart (which because it is monthly, does not always show the extremes properly!) you might be forgiven in believing that the entire correction was complete, in the same way as that might be the case with GE. After all the A-B-C is perfectly formed with all three legs equal. Also the loss from $110 to $6 certainly qualifies as a bear market correction. But the waves are there to fool just about everybody so we are considering the possibility that the C-leg is not yet over. Once or twice now we were very bullish on the stock but missed buying it by a few dollars only to see it almost double. So here is a slightly different take;

ms oct 25 2012 mms oct 25 2012 s

For the sake of the argument we assume that the great recession drop, wave C, was not yet complete. It could simple be 3 waves still requiring a 5th, or alternatively the big B wave was not a b-wave but an X-wave instead, as in a double zig-zag down from the 2000 high. In any event if we are not already in a new bull market the most probable interpretation is that we are working on a triangle. This idea is supported by the fact that if it is not a triangle waves 2 and 4 are both zig-zags and therefore do not alternate ( they do not have to but it is most common). Also a triangle is the pattern par excellence for killing time by breaking the channel and moving sideways. Time will tell but in all cases a buy at around $9/$6 would appear to be a safe bet, if it ever gets there.

MS, Morgan Stanley update

ms  oct 10 2012

We have liked MS for quite some time, particularly earlier this year when the stock hit the line connecting the lows over the past 5 years. We are now up about $6 from those levels (+- 50%) . If this is an A-B-C from 2007 on, see previous blogs as that is not necessarily the case, then we should still get a new low which, in turn, would imply that we are in a 4th wave, probable a triangle as these structures normally break the trend lines. A d and e seem to still be required so it may take a little time but the stock probable will not go much higher. We would sell here.

MS, Morgan Stanley

ms june 2012

See previous blogs. For reasons mentioned before we think this is a stock to own for the longer term, but that does not mean that one should not try to get it at the lowest possible price. The EW count would suggest that we are most likely about to go into a minor wave 4 and after that we should have a 5th. This would take the stock to just under $10. A similar level is obtained by using the “gap-in-the-middle” approach. Time will tell.