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Raymond James Financial, Inc. Message Board

  • thegrandstrandgroup thegrandstrandgroup Apr 28, 2008 9:25 AM Flag

    Morgan Stanley says SELL Financial Rally, Risk not over - reported TODAY

    By Ed Welsch
    Of DOW JONES NEWSWIRES


    Sell the rally in financial stocks, analysts at Morgan Stanley told clients
    Monday, saying more capital raising, dividend cuts and deleveraging are coming
    across the sector.

    Financial stocks rose in last week's trading as momentum investors rotated
    out of securities seen as safer, such as commodities and U.S. Treasury
    securities, and into investments that had been shunned, like corporate bonds
    and financial stocks. Financial stocks in the Standard & Poor's 500 index are
    up more than 15% from their lows on the March 17 bailout of Bear Stearns Cos.
    (BSC).

    The tentative movement back into risker investments shows that some investors
    are willing to test the idea that things are looking up for battered financial
    companies.

    But Morgan Stanley analysts Betsy Graseck, Cheryl Pate and Justin Kwong
    aren't convinced. They believe the difficulties in the credit markets are only
    in their "3rd inning," and that the situation will be worse than the
    recessionary environment of 1990 and 1991.

    "We think it's a mistake to chase this rally," they wrote. "The risk is much
    greater that credit deterioration will accelerate and banks will raise more
    dilutive equity and cut dividends [more] than expected."

    -By Ed Welsch, Dow Jones Newswires; 201-938-5244; edward.welsch@dowjones.com


    (END) Dow Jones Newswires

    04-28-08 0838ET

    Copyright (c) 2008 Dow Jones & Company, Inc.

    08:38 042808

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