Morgan Stanley Sets Aside 72% of Revenue for Employees’ Pay

i don't understand how a company with $1.26 billion in net loss can set aside money for compensation, where is that money coming from?

Capital.

stevejhx, but if you don't retain good employees in a servie business you will go bankrupt anyway. Talent is key, without that you might as well close shop. They have no choice.

This could hurt MS, sure. We'll have to see.

But who this is going to crush... the non-MS, non-GS banks. Think citi was getting its ass handed to it before? BOA? These guys are getting pulled in two bad directions at the same time.

Bonus money = fear for nyc10022 & stevejhx

and the same people who got paid last year, will get paid this year. no help for RE. already priced in. In total, there will be less individulas who get paid as well. must suck pinning ur hopes on someone else's work.

> Bonus money = fear for nyc10022 & stevejhx

What would I fear? The discounts I was looking for are here. This is a pretty awesome time to be in this position.

Methinks the guy crapping his pants is projecting...

"Bonus money = fear for nyc10022 & stevejhx"

What would I fear? I think the more that Goldman makes the better - I do a lot of work for them from Hong Kong to London to New York, and they pay Top Dollar. I don't make nearly what they do but I make a lot more than the MS or JPM people, and I never have to leave my house.

I say bring on the profits - if you can afford them.

I truly, truly doubt that you as a translator are even close to what MS/JPM people make. Sorry, stevejhx!

the bears have nothing to lose in this situation whereas teh bulls are sweating bullets and hoping that other peoples hard work will make them money. basically like a parasite

"Sorry, stevejhx!"

No need to be - at 12-14 cents per translated word, it adds up!

Even with accruing 72% in Q2 2009 (I'll be amazed if they do that in Q3 and Q4), the YTD accrual is still down 14% YoY. That means a smaller bonus pool for RE purchases even if some per caps are higher.

And 2009 includes one month of MSSB so the bonus pool is down more than 14%.

"No need to be - at 12-14 cents per translated word, it adds up!"

Damn! Assuming 1000 words per page you are polishing off $120 per page. I am surprised your job hasn't been offshored yet. You have a business opportunity here.

iam - it has been offshored for into foreign languages. Alas, English speaking countries are all very expensive, it takes a huge amount of education to do the job (you get paid for your knowledge of the subject, not so much the language), English differs from place to place, and time zones get in the way of short deadlines. As I lived in the UK I can write UK English and format UK documents.

Your average double-spaced page has about 300 words on it.

Steve,
Not a bad niche. And the great thing is you can live anywhere and keep doing this.

> the YTD accrual is still down 14% YoY

With the baseline being the significantly down year, correct?

Yup - it's a great niche. Gives me time to read JuiceMan's posts & laugh, as well!

10022 - correct. It's down 14% vs a down year.

thanks for the follow up.

Thats actually a pretty horrible sign, and now it makes more sense. They had to do it to match goldman, but its not a very good sign when you have to STRETECH to only be down 14% off a horrible year.... and thats your best quarter!

I didn't catch this before, but the reuters headline is...

"Morgan Stanley posts third straight quarterly loss"

Wonder how long they'll be around to pay bonuses at all...

They lost over a billion.

I almost forgot...

(crickets)

Wow....

I'm a defender of Wall Street, but even that takes some cajonies....

Can you imagine what Citi or BoA's Capital Markets groups are putting aside for compensation just to keep up with these guys as well as compensating for the stain of working there?

Should be good for a late fall controversy...

I predict that unless their results improve greatly that the regulators will not let them give out those bonuses except as restricted stock. In which case if I were a shareholder I'd be mighty pissed about the dilution.

They seem to forget that they are now a state-chartered commercial bank, and the rules are very different. I can just see Cuomo going after them for breach of fiduciary trust.

Steve, If you read the earnings report you will see that MSSB will pay most of their retail brokers (they have about 20,000 brokers) I'm guessing around 15,000 will receive a retention bonuses (total cost is about 3 billion). These brokers had zero to do with subprime, commercial RE, credit default swaps, etc.

This is a huge one time expense that they are setting aside a boatload of cash for hoping that this traditionly solid business will pay off when the economy turns. And this one time charge will not be in next years earnings... retail brokerage earnings have been steadily growing (except for 2008) for years and never experienced anywhere near the loses or risk seen at Citi's Investment Bank or MS's Investment Bank.

http://online.wsj.com/article/SB124386982276872457.html

I understand that the brokers will need to be paid, but regulators won't care. Having been a bank auditor I can assure you that the regulators look twice at any bank that is losing money. First thing they do is shut down dividends. Already MS has none - so compensation is the biggest variable expense they can control.

As I said, if things improve they'll get away with it, but if they keep on posting losses the whole shebang will be shut down. This is not 72% of the BOTTOM LINE, it's 72% of the TOP LINE, which is UNHEARD OF.

You are right, 72% is absolutely staggering. These retention bonuses are not anything new...I would think they must have had this cleared with the regulators long before this announcement however...then again you never know....

wow

"I would think they must have had this cleared with the regulators long before this announcement however"

Not necessarily. They are going to make the argument that they need to keep their people; the regulators are simply going to resort to common sense: why do you have to pay so much to keep people who are losing money? Wouldn't it just be better to let them go?

I don't really have the time to read all the bs on this thread, so forgive me if this was covered, but there is clearly another round of cash infusion to come into this real estate market before it really crashes. Anyone looking to "bottom fish" or bargain hunt now at $800/ft is going to get CRUSHED to the extent that they will become homeless. Ironic. You buy a home only to become homeless.

And the best part is someone is telling you about it but you still do it.

"is clearly another round of cash infusion to come into this real estate market before it really crashes."

Really? With unemployment at 9.5% and prices deflating everywhere? Can you buy real estate with restricted stock?

"is going to get CRUSHED to the extent that they will become homeless."

I think to "become" homeless they'd already need to be homeless. The homeless don't buy million-dollar apartments.