Goldman, Morgan Stanley Most Correlated to Europe

Goldman, Morgan Stanley Most Correlated to Europe
News
Like Us On Facebook
Like Us On Facebook

Goldman Sachs (GS) and Morgan Stanley (MS) stock prices have shown the highest correlation to a sample of large European banks among U.S.-based financial institutions in 2012, according to a report published Friday by BernsteinResearch.

The high correlation of Morgan Stanley and Goldman to Europe relative to other U.S. institutions is in some respects surprising, given, for example, that JPMorgan shows much higher credit default swaps exposure to countries on the European periphery: Portugal, Ireland, Italy, Greece and Spain.

However, Hintz points to the 2008-2009 crisis, when “investors worldwide were shocked to realize that the major capital markets banks around the world were tightly linked together through their over the counter derivatives books.”

Further lessons from the crisis, Hintz contends, were that “liquid markets can become illiquid, all trading positions are correlated in a tail event, hedges rely on correlations or assumptions of liquidity that may be lacking in a crisis, all short term funding is suspect and even secured short term funding can fail, and only common equity has value.”

The sum of all of these lessons, according to Hintz, is that “Morgan Stanley and Goldman Sachs face investor skepticism that is difficult to overcome in today’s uncertain geopolitical environments.”

Referring to Morgan Stanley and Goldman as “honorary European banks,” Hintz observes that “needless to say this is an ‘award’ that [the two securities dealers]would prefer not to win.”

Elite.

Share Tweet
React
Like Us On Facebook
Like Us On Facebook

Preston Waters

Preston Waters is a thinker. He's not your traditional philosophical persona, however, as he leaves no topic untouched. Covering all the bases, from business to women, Preston Waters is the ultimate man's man for Gen-Y.

More In News

World Adam Matula

Woman Miraculously Escapes Death After Flying Axe Crashes Through Her Windshield (Photo)

Many drivers have experienced cracked windshields due to rocks or debris falling from commercial vehicles. But two Topsfield, MA, motorists were caught unaware when an axe flew from the back of a dump truck into their windshield. The driver and passenger, only identified by the Massachusetts State Police as an anonymous male and female, were understandably shaken […]

World Alexia LaFata

Artist Depicts Cartoon Characters As Hamas Militants, And It’s So Wrong (Photos)

The conflict between Israel and Palestine shows no signs of stopping — and one artist has crafted his own shocking take on the issue. Italian artist and graphic designer aleXsandro Palombo released illustrations featuring Aladdin, Jasmine and other cartoon characters depicted as members of Hamas. Palombo introduces the illustrations in a blog post and condemns the organization […]

Also On Elite

Entertainment

19 Reactions To Justin Bieber Getting Punched In The Face

It’s sad when two wealthy, arguably attractive celebrities can’t just get along outside of an upscale club in Ibiza. Seriously, what is this world coming to? This alleged love triangle between Justin Bieber, Orlando Bloom and Miranda Kerr is the kind of stuff that makes up Lifetime movies. Guys thought they couldn’t be more jealous […]

Humor

Guy Sick Of Text Spammers Decided To Give Them A Taste Of Their Own Medicine

I’m sure there’s an elderly person somewhere who enjoys getting unsolicited calls and texts (realistically, it’s just calls), but if they exist, I haven’t met them. I wouldn’t go on a cruise even if it were free, so I don’t get too excited when a random number tells me I’ve won tickets. Normally, spammers take […]