Morgan Stanley: Yet More Proof That Stock Moves Make No Sense

I puzzled yesterday over the question of why Goldman Sachs fell in the wake of spectacular earnings. Today, it’s the other way around: how on earth is Morgan Stanley’s stock rising in the wake of losing $3.56 billion last quarter?

The stock-market reports aren’t a huge amount of help. Investors were “pleased to hear that the company got a $5 billion infusion from China’s government-controlled investment vehicle, China Investment Corp,” says Madlen Read of the AP. But by my calculations CIC is buying in at a discount of about $2 a share to where MS is trading right now: the stock is hardly trading up to the latest valuation point.

My feeling is that if anybody tells you that they understand today’s price action in Morgan Stanley, they’re lying. The only thing I can think of is that there was some kind of insider trading going on: a lot of people knew or suspected that the bank would take an enormous loss this quarter, and went massively short ahead of the earnings announcement. But I don’t really believe that: what I do believe is that short-term stock movements are, to all intents and purposes, random – even on the day of an earnings announcement, when there really is new news to move the market.

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