Comments on: Mitsubishi UFJ to Aquire Up to 20% of Morgan Stanley http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html Mon, 23 Nov 2009 10:17:20 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Yves Smith http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html#comment-16526 Yves Smith Mon, 22 Sep 2008 18:04:00 +0000 http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-to-20-of-morgan-stanley/#comment-16526 Thanks for the catch. Have made the correction.<br/><br/>Wonder if that was a Freudian typo. Save the Sumitomo Bank investment in Goldman, Japanese minority investments in western financial firms have not fared too well. Thanks for the catch. Have made the correction.

Wonder if that was a Freudian typo. Save the Sumitomo Bank investment in Goldman, Japanese minority investments in western financial firms have not fared too well.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html#comment-16522 Anonymous Mon, 22 Sep 2008 17:52:00 +0000 http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-to-20-of-morgan-stanley/#comment-16522 cash risk or cash rich? cash risk or cash rich?

]]> By: AC http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html#comment-16520 AC Mon, 22 Sep 2008 17:00:00 +0000 http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-to-20-of-morgan-stanley/#comment-16520 Please forgive me for posting less-related opinion here. I would appreciate your thoughts. <br/>Here it goes:<br/> <br/>I used to think that US faces serious default risk, but I wonder whether "now" is too early to bet on it. I just can't see who benefits if US defaults because it cannot roll over the debt and US$ plunges. I thought that closest it will get to default is a couple of point higher interest rate for T-bonds, but even for that I am not sure if I will see it within 5 years. Because <br/>- Who benefits if US defaults because it cannot roll over the debt and US$ plunges?<br/> China holds c.$900B of treasury and gse debt. I don't know what % of China's wealth is in US treasury and GSE debt, but it is roughly 27% of 2007 GDP and 50% of foreign exchange reserve. Do they really want their asset value to decline? Plus, when US$ loses its reserve currency or trade currency status, which other currency can stably replace US$? I think the time CNY (RMB) will take that role will come but it is not 2009 and not 2010. China does not want to and cannot afford to float its currency. I believe China has already has upper hand in negotiating with US (look at the influence Chinese gov made to US to bail out Fannie and Freddie), but it is not yet ready to take the world leadership.<br/><br/>I would greatly appreciate your thoughts.<br/><br/>---<br/>Yves - <br/>Given that it is difficult for me to be timely for posting opinions and questions (I am in Asia) what would you recommend the best way for me to participate will be? <br/>It is my least intention to interfere your blog, which I love to read every late night or early morning. Please forgive me for posting less-related opinion here. I would appreciate your thoughts.
Here it goes:

I used to think that US faces serious default risk, but I wonder whether “now” is too early to bet on it. I just can’t see who benefits if US defaults because it cannot roll over the debt and US$ plunges. I thought that closest it will get to default is a couple of point higher interest rate for T-bonds, but even for that I am not sure if I will see it within 5 years. Because
- Who benefits if US defaults because it cannot roll over the debt and US$ plunges?
China holds c.$900B of treasury and gse debt. I don’t know what % of China’s wealth is in US treasury and GSE debt, but it is roughly 27% of 2007 GDP and 50% of foreign exchange reserve. Do they really want their asset value to decline? Plus, when US$ loses its reserve currency or trade currency status, which other currency can stably replace US$? I think the time CNY (RMB) will take that role will come but it is not 2009 and not 2010. China does not want to and cannot afford to float its currency. I believe China has already has upper hand in negotiating with US (look at the influence Chinese gov made to US to bail out Fannie and Freddie), but it is not yet ready to take the world leadership.

I would greatly appreciate your thoughts.

—
Yves –
Given that it is difficult for me to be timely for posting opinions and questions (I am in Asia) what would you recommend the best way for me to participate will be?
It is my least intention to interfere your blog, which I love to read every late night or early morning.

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html#comment-16513 Yves Smith Mon, 22 Sep 2008 16:05:00 +0000 http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-to-20-of-morgan-stanley/#comment-16513 With all due respect, I ran the mergers and acquisitions department for Sumitomo Bank, which at that time was the second largest bank in Japan, so this is a beat I know personally.<br/><br/>The Japanese would not have let this become public if they were not prepared to proceed. Morgan Stanley is too important a business relationship to Mitsubishi for Mitsubishi to damage them by saying they'd do a deal and then back out, or merely sign up for an option. With all due respect, I ran the mergers and acquisitions department for Sumitomo Bank, which at that time was the second largest bank in Japan, so this is a beat I know personally.

The Japanese would not have let this become public if they were not prepared to proceed. Morgan Stanley is too important a business relationship to Mitsubishi for Mitsubishi to damage them by saying they’d do a deal and then back out, or merely sign up for an option.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html#comment-16512 Anonymous Mon, 22 Sep 2008 16:00:00 +0000 http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-to-20-of-morgan-stanley/#comment-16512 Got to agree with Matt. This is like the MER deal -- more window dressing with an option to buy if by some miracle things get better in the near term. Got to agree with Matt. This is like the MER deal — more window dressing with an option to buy if by some miracle things get better in the near term.

]]> By: Matthew Dubuque http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-tp-20-of.html#comment-16503 Matthew Dubuque Mon, 22 Sep 2008 15:14:00 +0000 http://www.nakedcapitalism.com/2008/09/mitsubishi-ufj-to-aquire-up-to-20-of-morgan-stanley/#comment-16503 Matthew Dubuque<br/><br/>Yves-<br/><br/>When the story notes a "range" has been set for the ultimate price, we need to read between the lines.<br/><br/>What is likely is that a "range" has been tentatively set based on several factors, but the Japanese seem likely to insist on a "reset" clause six months to a year down the road to ensure them against further dramatic downturns in Morgan's share price and "unexpected" drops in the value of Morgan's book.<br/><br/>Matthew Dubuque Matthew Dubuque

Yves-

When the story notes a “range” has been set for the ultimate price, we need to read between the lines.

What is likely is that a “range” has been tentatively set based on several factors, but the Japanese seem likely to insist on a “reset” clause six months to a year down the road to ensure them against further dramatic downturns in Morgan’s share price and “unexpected” drops in the value of Morgan’s book.

Matthew Dubuque

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