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Automatic TRANSCRIPT

Start with the big deal of the day and that Morgan Stanley buying e-trade. This is an all stock deal valued at thirteen billion dollars and this shouldn't be super surprising. I guess it when you think about the ripple effects of last year when Schwab said Yeah we're going to cut our trading commissions zero and cut to however many months later and e trades like. Yeah Yeah we'll we'll we'll let ourselves be acquired for that price yeah E. Trade has Grown into a large Large company with plenty of money in it and plenty of assets and accounts but having really built its model around take control of your finances by trading stocks and you know that that portion of the business being making money off of every single. One of those trades gone They needed Sort of the new business model to to marry up too and they found one. I was a little surprised to see right at the open this morning. Shares of Morgan Stanley. Were down like four five percent. And I just you know in in my limited analysis. I thought I I'm I'm not sure you know that's not a huge drop and it has come back up from there. Were right before the. We walked in the studio check. Maybe only down one and a half percent but it seems like a good deal for Morgan Stanley. They think they can get half a billion dollars out of quote unquote synergies over the next three years and the resulting firm is going to have three trillion dollars worth of assets. I mean their ability to use the deposits within each raid to help fund their lending operation. It seems like a good deal for Morgan Stanley. All right well up until recently The the standard movement of stocks on an acquisition would be the acquiring company went down in the acquired company went up so I think that's one thing to remember. Is that an acquirer. Having its stock go down is not all that unusual and I think. The implication from the market's initial reaction. Which as you pointed out might be more muted. As the day goes along is that this was an acquisition of assets. But maybe paid more than you had to It's it's not not a jaw-dropping price but I think Goldman Sachs has come out and and sort of promoted themselves by saying that. They built their own Funnel of similar assets or Marcus. And you know that baby Morgan Stanley is overpaying compared to you know what the market rate is for a pile of assets and the business and a platform as well the comes along with those assets but really the value seems to be that whereas e-trade people fund their accounts. They leave a certain amount of money in in cash and E. Trade pays them pretty little for that and invest that into largely mortgage-backed securities and now that spread which is pretty tight and going to remain tight in the low interest rate environment. They can bring that over to Morgan. Stanley who need assets Because they like to lend to Richer people that Will end up paying a little bit more. And our our barring the money With a little bit more risk than the more mortgage backed security market that E. Trade was getting all of its revenues from basically the the float the spread on that. You're absolutely right all of you next topic there was a I I was GonNa say you're absolutely right. That all things being equal the average deal of two public companies the acquiring company their stock drops. A little bit. I was surprised at the amount it had dropped. But you're right. No one should be surprised that it dropped a little bit. By the same token no one should be surprised the Goldman Sachs direct competitor of Morgan Stanley. Came out and said we think you overpaid for that and by the way. Here's our thing which we built ourselves. I mean no disrespect to Goldman Sachs but if they think that Marcus has a better has better visibility and name identification than e-trade. They're fooling themselves. Well there's There's about fifty billion In Marcus according to what I've read and so that's a little bit more than e-trade okay. E-trade has got the name. Recognition has got the brand but people associated with stock trading which is now free so the where the brand goes is going to be interesting Know once upon a time it was scaled around Commercials of babies trading stocks stroke. Why is there that remember? The trade baby That was a focus of the company for years and a good advertising campaign You just reminded me of the The CEO Morgan Stanley was being interviewed on CNBC this morning and it talked about. He was asked. When did you first start having these conversations with E. Trade and he said well to be perfectly honest back in two thousand and two when I was at Merrill Lynch and I was impressed and at that point I just stopped listening to what I said because I was reminded like Oh right Merrill Lynch. That was a brand that used to exist. You know to your point about E. Trade. We'll see where the brand still exists. Merrill Lynch random exists. I'M PRETTY SURE. Be Of a is methodically. Get eliminating the Merrill Lynch brand. I'm just saying it exists. You can you can go to. There are Merrill Lynch Coutts there. There are and billions of dollars there. Now that you one of the reasons for that maybe that you've got a generation that trusts the name Merrill Not that you're trying to draw new assets in surly Andrew that but you're not going to eliminate that brand as quickly as you might think because there are piles of money there that are maybe not paying close attention but alike the association that they have with with that brand. I don't think it's going away quickly. I just think it's going away and the evidence points to the fact that it's going