Friday, April 15, 2011

Oh Yes, Morgan Has Done This Before.

Ran into an acquaintance/friend yesterday who I hadn't seen in some time. After a quick catch up conversation I asked what his plans were given he is in his late 20's and fantastic personality to which he replied;

"My wife and I would like to move south (Florida) but we would take such a hit on the house."

quickly got him up to speed with just one example of how condo associations have had to petition the courts for the mortgage holders, like Citi, to foreclose (big assumption that Citi actually holds the note but that is for the courts to decide) on the property given their penchant to 'delay and pray' or 'extend and pretend', take you pick.

You shoulda' seen his eyes get big when I told him the cases in particular the condo debtor hadn't paid assoc. fees in 8-9 months and when the dirt, I mean details, finally came out found out we learned said debtor hadn't paid the mortgage in something like 14 months yet Citi mysteriously hadn't commenced foreclosure proceedings.

Needless to say I explained jingle mail and one can build quite a nest egg to cushion the credit rating blow when one doesn't pay ones mortgage for 12,18 or 24 months. He was incredulous ot say the least but I enphasized that any decision shouldn't be made lightly or rashly and never before prudent and efficient counsel from top to bottom had been saught out.

I left our conversation feeling for him and actually questioning whether or not I should have said what I said to him about the jingle mail. That faded drastically this morning as I read about how the vaunted Morgan Stanley, yet another of the bailout laden, too big to fails, member of the tail wagging dog economy declared that they are performing some jingle mail of their own via one of their property funds.

According to news reports;

A Morgan Stanley property fund failed to make $3.3 billion in debt payments by a deadline on Friday, handing over the keys to a central Tokyo office building to Blackstone and other investors, the largest repayment failure of its kind in Japan.

It marks the latest fallout from a series of highly leveraged investments by Morgan Stanley , one of the most aggressive investors in worldwide property markets before the global financial crisis.

Morgan Stanley common shares are up this morning on the news that they have defaulted on the note. Yup up on that news.The report goes on to state:

Morgan Stanley repackaged the loans into 125 billion yen worth of CMBS in 2005, according to a website for Morgan Stanley. Taking advantage of a run-up in property prices, MSREF V refinanced its debt on the Shinagawa property in 2007 with new debt worth 278 billion yen, twice the value of its purchase and likely yielding a tidy profit for the fund. The refinanced debt was sold in six different tranches by Morgan Stanley to investors.

Wanna bet the tranche was AAA rated?
Wanna bet your, your wifes's or your bother-in-law's pension plan held some of it?
Wanna bet your, your wife's or you brother-in-law's pension plan went along with the re-financing and most probably bought more of that AAA plated paper?

I love it when clients come first. I mean not just at Goldman but all across Wall St. were you know they are looking out for you.

Now for those with a short or selective memory this is not the first time Morgan Stanley has walked away. Oh yes, Morgan has done this before. So given this , I'm actually surprised MS stock didn't gap up wildly on the news as the same valet parking attendants managing your pension fund who bought that AAA plated paper buy MS common stock as well. What given that Morgan's free cash flow should soar on this and future similar activity.

And regarding the whole walk away/jingle mail thing out there, its okay when Morgan Stanley does it multiple times but you serfs out there, no, you must, to quote the legendary yet classy at the same time Charlie 'hypoocrite #2' Munger "suck it in and cope".

Do any guillotine manufacturers trade publicly?

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