Dick Bove is not too happy with Morgan Stanley and he’s letting everyone know it. In a report he released today, Bove in essence says that if the bank fails to dramatically shifts gears, it is pretty much doomed.
Bove is questioning the soundness of the bank’s latest strategy: increasing trading risk and adding traders. He notes that the bank has had problems with timing for the past decade, generally moving “with too little, or too much, too late.”
“Why should one believe that taking more risk is a wise business plan? Has Morgan improved its risk management procedures? If so, how? Does it has have a new computer system; new software; new databases; new IT personnel; new trading disciplines; etc? Or is it just hiring traders and giving them more money to invest?” Bove writes.
And he continues, depicting a pretty damning picture pointing at the bank’s previous failures. Those include:
- not foreseeing the end of the dot com boom,
- having difficulty developing a strategy to deal with the new financial markets that developed in the mid 2000s;
- charging into alternative investing at the wrong time in the cycle;
- increasing its presence in housing at the wrong time;
- pulling back from the markets too dramatically when it should not have;
- and toying with the argument that it should become a regional bank and then dumping the concept.
And that’s just for starters. He ends with comparing the bank’s strategy to that of Lehman’s. Citing Lawrence McDonald’s book “A Colossal Failure of Common Sense ,” Bove says that he founds it shocking that Lehman’s trading consisted of guesses by professionals and a total lack of discipline.
“Is this what Morgan is talking about?”
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