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GE's CFO on Goldman and Morgan Stanley...

(Reuters) - "If Goldman and Morgan Stanley became bank holding companies, certainly you'd expect us to at least evaluate what would that mean for us as a backup alternative to whatever we're doing."

Goldman (GS): Let's Have A Town Hall Debate...

Goldman conveniently waited until after 5PM on a Friday of the worst week in the US stock market since the early 1930's to file a mixed shelf registration of "indeterminate amount". Marcus Goldman must be rolling in his grave.

Investors, including Warren Buffett, and clients alike must watch what GS and MS do, not what they say. Never mind this ridiculous notion that it’s the evil doer short sellers at fault. That is both alarmist and un-American. Bear, Lehman, Merrill, Morgan, and Goldman all said they didn't need capital, remember? Earlier this week, Lehman’s Dick Fuld appeared in front of the American people. He still couldn’t find it within him to take on 100% of the accountability for Lehman’s demise. If you guys are going to get paid to wear the ‘C’ on your jerseys, let’s get real.

Research Edge is built on 3 core principles: Transparency, Accountability, and Trust. I am issuing an open challenge to the CEO's of these two companies, Goldman Sachs and Morgan Stanley, to come to New Haven, CT, and have a Yale student organized town hall meeting on those three items and how they see them fitting into their current business model. CNBC can televise it, instead of wasting people’s money and time with “Fast Money”. We can start at 6PM, promptly.

Times are changing. Americans are tired of hearing about a Japanese bank taking a stake in Morgan Stanley. How many press releases were issued this week on that front? Too many.

I am sure Americans would appreciate these highly paid CEO's to take a stake in American principles. Crisis creates opportunity, here’s yours guys. Give us a call at , and we’ll set up the debate.

Respectfully,
Keith McCullough

(chart courtesy of StockCharts.com)

Eye On Leadership: Chesapeake's CEO Gets The Ultimate Margin Call

This is the largest natural gas company in the world. Not unlike the Russian Oligarchs, he was forced to basically blow out of his entire position... he was buying his own stock on margin.

"I am very disappointed to have been required to sell substantially all of my shares of Chesapeake," McClendon said... "These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis."

Daryl Jones
Research Edge LLC
  • Chesapeake Energy CEO Aubrey McClendon sells bulk of his stock to meet margin calls
    OKLAHOMA CITY (AP) -- Aubrey K. McClendon, chief executive of Chesapeake Energy Corp., has sold the bulk of his stock in the company over the past three days in order to meet margin loan calls, the company said Friday.
chart courtesy of stockcharts.com

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SP500 Levels Into The Close...

I'm like a broken record here now, but we're a buyer here on the worst week for the US stock market since 1933.

BUY stocks level for the SP500 = 848.74

SELL the "Trade" = 1041.89

By my math, there's 23% upside and 3% downside from that 848 line.

Have a great weekend,
KM

House Of Cards: Morgan Stanley's Casino Investment Is A Metaphor For This Leverage Cycle ...

NOTE: The 2 lines of the title and the final line are all taken from the classic song “Atlantic City” by Bruce Springsteen.

"DOWN HERE IT’S JUST WINNERS ANED LOSERS…"
…John Mack gets caught on the wrong side of that line

Morgan Stanley owns a partially finished Casino in Atlantic City.

Really.

30 years ago a top tier Wall Street bank would have turned up its nose at accepting a casino company as a banking CUSTOMER, now Mack & co actually own one. Well, a partially finished one anyway.

The fact that Morgan Stanley is investing in a $2bn project in Atlantic City certainly raised eyebrows in our office. Revel Casino, which will have 3,800 rooms, is scheduled to open in two years and will be one of AC’s largest casinos. Taking current AC market conditions into account, this is certainly a risky move. MS is still seeking financing for the project. While a $2bn bridge loan will not ruin the company, the move certainly raises more questions about the leadership at the firm – something we’ve had our Eyes on constantly of late.

The development of the Revel by Morgan Stanley subsidiary Ventura Holdings seems to have been dogged by problems since inception in 06. The fun Started when Resorts International launched a fraud suit against the bank for last year, claiming that Morgan Stanley had enticed RI’s CEO to steer a prime 20 acre property that had come on the market to them in return for the CEO spot in the new Casino. According to a separate suit filed by RI’s former CEO, Audrey Oswell, Morgan Stanley reneged on that offer as soon as the land was purchased.

Yesterday’s NYP Article highlighted the very latest bump in the road. A ruling by a state judge last week removed a bond referendum from an Atlantic City ballot that would have provided $56 million in assistance to the Revel project. How ironic: the Federal Government is willing to bail out John Mack’s mortgage trading casino but Atlantic City won’t be rescuing his actual Casino.

We at Research Edge have highlighted the issues with Atlantic City in general. The addition of new towers has not prompted any sort of growth; revpar trends are in decline and there has been no market gaming revenue gained from the new towers (see “AC: UNDERROOMED? TRY OVERROOMED” 9/2/08). Furthermore, the ongoing uncertainty regarding the smoking ban (“AC: THE GOOD NEWS….” 9/15), high gas prices, and general decline in consumer markets, make the odds long on this MS gamble paying off.

“Everything dies baby, that’s a fact.”

Andrew Barber
Director
Research Edge LLC

October 16, 2008: This Should Be An Interesting Show...

SPONSOR: House Oversight and Government Reform Committee

AGENDA: Full committee hearing on "The Regulation of Hedge Funds."

WHO: John Alfred Paulson, president of Paulson & Co., Inc.; George Soros, chairman of Soros Fund Management LLC; Philip Falcone, senior managing director of Harbinger Capital Partners; James Simons, director of Renaissance Technologies LLC; and Kenneth Griffin, CEO and managing director of the Citadel Investment Group, testify

DATE: October 16, 2008

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