EDITOR NOTE: No investment strategy is complete without a sound “risk management” strategy. Without it, there is no investing, just pure speculation. Gambling--hence Wall Street’s cynical and unsavory reputation as the world’s largest gambling house. Morgan Stanley must have forgotten about this basic principle when it lost $911 to one hedge fund’s overleveraged bets--the recently infamous Archegos Capital Management. Maybe their risk managers just didn’t notice the outsized risks; or maybe, the profits, despite the risks, seemed too good to pass up. But why would customers even consider trusting their funds with a bank that took on such reckless and oversized risks? The bank will likely survive. But every now and then, you’ll get a Lehman Brothers, or a Bear Stearns. You can never tell which banks will follow that unfortunate path. And judging from this latest blunder and the Archegos implosion, neither can Morgan Stanley.
Morgan Stanley became the latest bank to get swept up in the implosion of Archegos Capital Management, reporting $911 million in total losses related to the debacle.
“The current quarter includes a loss of $644 million related to a credit event for a single prime brokerage client, and $267 million of subsequent trading losses through the end of the quarter related to the same event,” Morgan Stanley said Friday in announcing first-quarter earnings.
The loss was tied to Archegos, said a person with knowledge of the matter.
Originally posted on Yahoo! Finance