Morgan Stanley: More of Its Assets Are Hard to Value
CNBC has reported that on April 9, 2008, Morgan Stanley, the country’s second largest investment bank, announced that more of its assets either became illiquid or otherwise hard to value during the turbulent first quarter of the year. According to its quarterly filing with the SEC, Morgan Stanley had classified $78.2 billion of assets as “Level 3” as of the end of February, up from $73.7 billion at the end of November.
Level 3 assets are those that have no ready market so the firm assigns them a value according to an internal model. In other word, they make their best guess. These values do not reflect actual market prices of these assets. Investors are left to cross their fingers and hope that Morgan Stanley – and the rest of Wall Street – have guessed correctly. Their track record to date, however, does not inspire confidence.
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